Think small business owners really are going to get tax credits through Obamacare health exchanges? Think again.
Reg Baker, chief operating officer of the Hawaii Medical Assurance Association, a health care insurance company not participating on the local Hawaii Health Connector exchange, told Watchdog.org the tax credits aren’t guaranteed.
Small businesses can qualify to receive the tax credits for only two years, must fill out extensive paperwork, and must make enough of a profit to receive any benefit from the tax credit, said Baker, who is also a certified public accountant.
“A great deal of effort can be spent trying to get the credit. And then with the fast phase-out starting at just 10 employees, and the fact that it is a nonrefundable credit, it results in a lot of wasted time and effort,” Baker said.
10 Pages + 7 Worksheets
The tax credit is claimed on Form 8941, which has 10 pages of instructions and contains seven worksheets.
In addition, the credit is nonrefundable, which means if a small business has little or no profit for the year, the credit is of little value. The credit can only be used to reduce the small business’ income tax amount, Baker said.
And not everyone will qualify. Owners, their families and dependents, descendants, stepchildren, all types of in-laws, and nieces and nephews are all excluded. Shareholders and partners of the company also are excluded, according to the Internal Revenue Service.
“What this means is that these individuals’ medical insurance premiums are excluded from the calculations, thereby reducing or eliminating the credit,” Baker said. “I strongly suggest that all small businesses considering the small business health care credit consult with their tax preparer and get some advice before buying medical insurance from an exchange. It could save a lot of time, frustration, and disappointment down the road.”
Limited to Priciest Plans
State Insurance Commissioner Gordon Ito told Hawaii lawmakers during a recent five-hour special briefing that small businesses will be allowed to choose from only the priciest plans on the local exchange.
Used with permission of Watchdog.org.