The provisions of the Affordable Care Act will be kicking in starting in 2014. Small business owners are now doing a lot of research on how to avoid taking a severe tax hit from the law. You often hear independent business groups complain about the additional taxes and penalties Obamacare will create. But what type of businesses will the provisions of Obamacare exactly target?
If you are a small business owner, here are a few facts you should know:
1. Business owners with more than 50 employees will be faced with the decision of whether to sponsor a health insurance plan for all of their workers or pay the federal government $750 per employee if the business owner chooses not to sponsor a health insurance plan.
With the poor economy, a business owner should do the math in order to find out which option would save him money, paying for a health plan for his employees, or paying the corresponding tax penalty to the government. Some business owners would likely pay the penalty since it is a lot cheaper compared to paying for an employee health plan.
2. Small business owners who employ 25 to 49 employees are not required to sponsor an employee health benefit plan. Those who do have health plans for their employees will likely be burdened with a health insurance premium increase. There is not a cap on health insurance premiums, thus insurers can now choose to increase premiums before the start of open enrollment.
3. Small business owners with employees fewer than 25 will actually get some tax relief if they are offering employee health plans. In 2014, 50 percent of the total premiums paid will be given in the form of tax credits if the business owner acquires insurance plans from the Small Business Health Options Programs.
It should be noted, however, that this tax incentive is not available to businesses with sole proprietorship, but only to corporations or Limited Liability Companies.