Health Care Reform Act

Chapter 4 SMALL BUSINESS TAX CREDIT, SHOP EXCHANGE, AND OTHER ACA TAX CHANGES IMPACTING INDIVIDUALS

LEARNING OBJECTIVES

After completing this chapter, you should be able to do the following:

• Identify which firms are eligible for small business tax credit given average wages and firm size.
• Identify which workers are included in the FTE calculation and which ones coverage is eligible for small business tax credit.
• Estimate amount of tax credit eligible for given firm characteristics and premiums.
• Identify effective dates of other ACA tax provisions.
• Determine if tax filer is subject to additional Medicare tax and estimate amount of tax.
• Identify ACA changes to tax-advantaged health accounts.

Small Business Health Insurance Tax Credit

Under the ACA, a small business health insurance tax credit is available for firms with less than 25 employees (including full-time equivalents) and average wages up to $52,000 in 2015.¹ While the ACA small business tax credit has been in effect since 2010, it was expanded in 2014 to coincide with the implementation of health insurance exchanges.² To qualify for the credit, firms within this firm size and wage category must contribute up to 50 percent of their workers' health insurance premiums. In addition, beginning in 2014, employers must enroll their employees in the SHOP exchange if it is available in their geographic area.

Small employers can claim the full credit amount (50 percent for for-profit and 35 percent for not for profit) if ...