What Health Insurance Tax Benefits Are Available for Employers in 2019?

November 26, 2018
By

Category: Payroll, Benefits

employer health insurance tax benefits

As a small business owner, every deduction counts. Make sure you’re getting rewarded for protecting your employees. A few changes are being made to health insurance tax benefits in 2019, including small business tax credits, deductibles, HSA, and HRA options. Make sure you’re in the know about which tax benefits will be available to you for the next calendar year.

What is the tax credit for small business health insurance?

The Small Business Health Care Tax Credit is available to businesses with fewer than 25 full-time employees.

To claim the tax credit, employers must cover at least 50 percent of premium costs and meet reporting requirements. Small business owners may have to report health insurance coverage values on each employee’s W2. If your company offers self-insured coverage options, employers must also fill out a detailed coverage form for each employee. Lastly, employers must withhold 0.9 percent of wages that exceed $200,000 to qualify.

Small business owners can benefit from the tax credit based on the percentage of premiums paid. The IRS has a detailed credit breakdown for business owners to follow based on their business structure. It’s important to understand the Small Business Health Care Tax Credit requirements before the new year to ensure reporting requirements are accurately accounted for.

The Small Business Health Care Tax Credit is available to businesses with fewer than 25 full-time employees.

Is employer health insurance tax deductible?

Small business owners can deduct much (if not most) of their health insurance expenses. With employer health insurance tax benefits, the first deduction can be made from premiums paid by the employer each month.

Some employers choose to offer a Health Savings Account (HSA) or Health Reimbursement Account (HRA) in addition to health insurance. These accounts can also be claimed as a business expense deduction.

What is an HSA?

A Health Savings Account (HSA) is a medical savings account which employees can choose to contribute to. HSA accounts require employees to make monthly payments, which are deducted from their paychecks.

The funds are dedicated to medical expenses, such as copays for doctor visits, deductibles, and other costs not covered by the health insurance plan. Why do employees choose to open an HSA instead of paying out of pocket? Health insurance tax benefits. An HSA does not require Federal Income Tax to be withheld which makes the account an attractive option for many employees.

What is an HRA?

Many business owners cannot afford to offer a health insurance plan to employees. However, options are still available for small companies who wish to provide employee benefits and incentives.

A Health Reimbursement Account (HRA) allows employers to reimburse employees for purchasing their health insurance plan. Each month money is deposited into the HRA by the employer. Employees can access the account and withdraw funds to put toward their monthly insurance payment. Just like an HSA, money deposited into an HRA is tax deductible.

Make sure you take these last months before the new year to review your health insurance options for 2019 to capitalize on the small business tax benefits!

About

As a professional copywriter, Dan produces strategic marketing content for startups, digital agencies, and established brands. He helps organizations tell stories, achieve online presence, and builds brands that communicate with their customers. Dan is also a regular contributor to Forbes. He started writing after his first professional role as a health promotions coordinator for a local family physicians office.

Category: Payroll, Benefits


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