Small Business Group Health Insurance Tax Credit aka SHOP Plans = TAX SAVINGS!
Eligibility
As a small business owner looking to save money on taxes, do you fit into the following criteria?
- You have 25 or less total full-time equivalent employees
- The average income earned by your employees is $54,200(as per the 2019 indexed amount) or less, excluding the business owner’s income
- You are willing to pay or are already paying 50% of the individual health insurance premium cost for the lowest-cost plan that you offer
If so, you may be eligible for the small business health insurance tax credit that was established as a provision of the Affordable Care Act, under the Small Business Health Options Program (SHOP). This tax credit can be up to 50% of the premiums (35% for tax-exempt businesses) that you pay for your employees. The credit is a sliding scale that reduces as the company size approaches 25 and the average salary approaches $54,200.
Benefits
In general, health insurance premiums are already a deductible business expense. However, a tax credit will usually provide more financial savings to a business versus a deduction. This is because a credit is a direct offset to taxes due. Since the tax credit caps out at 50%, small businesses can still take a tax deduction for the premiums paid offset by the amount of the tax credit. The tax credit is available for two consecutive tax years. If you are implementing your SHOP plans outside of your tax year schedule, check with your accountant to see if it is possible to delay the first year of your tax credit so you can get a full 12 months of premium credit.
Sounds Great. How Do I Get In?
The group health plan that you purchase must be a SHOP-qualified plan, which is offered by many insurance carriers as a subset of their portfolio. Licensed brokers must go through additional certification training in order to sell these SHOP-qualified plans. Luckily, our Corporate Coverage brokers are certified to sell these SHOP plans in Maryland, Virginia, and DC, among our other employee benefits services.
Technically, an employer can choose to offer one or more plans from the same carrier or plans from multiple carriers. But, from a practical perspective, we have not seen any employer opt to offer plans from multiple carriers due to the administrative burden of the set up required when using multiple carriers.
To get an estimate of your potential SHOP tax credit to save money for your business, use the online tax credit estimator at https://www.healthcare.gov/small-businesses/choose-and-enroll/tools-and-calculators/.
Reach out if you want to explore your eligibility for the tax credit and to learn about what plan options are available, or for any other corporate insurance needs.