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The Affordable Care Act Impact on Small Businesses

posted in Healthcare Law, Small Businesses, Taxation by

Taxes affect business decisions made at all levels of a company.  The Affordable Care Act (Obamacare) has many new taxes concerning small businesses.

 Positive Impacts of the Healthcare Law on Small Businesses

One of the most significant aspects of the Affordable Care Act is the employer mandate that businesses provide health insurance to their employees or face a penalty.  However, this mandate only applies to those businesses with 50 or more full-time employees (or full-time equivalents).  Firms that provide health insurance and have less than 25 employees can receive a tax credit.  Firms with less than 100 employees (50 in some states) can purchase insurance through the Small Business Health Option Program (“SHOP”) exchanges starting in 2014.  The SHOP exchanges offer small businesses a large variety of Qualified Health Plans that give employers control over participation and how much to contribute towards coverage; grants flexibility for employers and employees budgets; and small businesses can apply for tax credits to cover up to 50% of premium costs of low to moderate wage employees.  Additionally, states in 2016 can allow businesses with more than 100 employees to purchase healthcare coverage through the SHOP exchanges.

A second change is employers in Medicaid Expansion states, like California, are not required to provide health insurance for employees who qualify for full coverage under Medicaid.

A third change is employers that provide health insurance to retirees ages 55-64 can receive financial help through the Early Retiree Reinsurance Program. This program is designed to lower the cost of premiums for all employees and reduce employer health costs.

A fourth change is that small businesses making under $250,000 in taxable profit do not have to pay the Obamacare small business tax increase (the Obamacare small business tax increase is a Medicare tax hike of 0.9% increase on the current Medicare Part A tax).

 Other Tax Changes that Benefit Small Businesses

The small business health care tax credit is available to small business employers that pay at least half of the premiums for single health insurance coverage of their employees.  Small businesses can claim the tax credit for two years, and eligibility will be based on number of full-time employees (thus employers that use part-time workers may qualify).

With the enactment of the Small Business Jobs Act of 2010, self-employed taxpayers who pay their own health insurance costs can deduct those costs from their net earnings.  Previously, the self-employed health insurance deduction was allowed only for income tax purposes.

What should you do?

The Affordable Care Act has many new and complex taxes going into 2014, and you may not be taking advantage of everything it has to offer.  If you are interested in determining how the Healthcare Act or how any other tax related issue will affect you or your business, contact Larry Horwitz at to discuss your options with our experienced attorneys.

02 Sep, 13

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