Friday, April 23, 2010

Small Businesses, Taxes Impacted by Healthcare Reform: Key Points

How will President Obama's healthcare legislation impact small businesses and self-employed folks? What parts of his plan are going to be smiled upon by small businesses, and which are going to elicit resentment? Let's take a look at some of the key provisions, focusing on how they will impact small businesses and the self-employed.

Increased Medicare Taxes on the Moderately Wealthy:  As of January, 2013, if an individual makes over $200,000 ($250,000 for a family), his/her Medicare tax rate will increase from 1.45% to 2.35%.

Have Coverage or be Fined:  Businesses with more than 50 employees will be required to provide coverage to their employees or be fined by the government, starting in 2014.

Smallest Businesses Exempted from Mandatory Requirements:  The smallest businesses (fewer than 50 employees) will be exempt from minimum federal requirements with regard to healthcare plans - including the requirement directly above to provide healthcare to employees or be fined.

Have Coverage or be Fined, Part 2: As of 2014, individuals who don't have health insurance will be fined by the government - unless buying the cheapest plan available to you would take up 8% or more of your income.

Tax credit:  Starting in 2010, small businesses (fewer than 25 employees) which pay at least half of their employees' healthcare premiums qualify for a tax credit of up to 35% of those premiums. The exact amount of the tax credit will depend on the number of employees and their average wage.

Small Business Health Options Programs (SHOPs):  Starting in 2014, small businesses (up to 100 employees) can pool together to purchase healthcare plans - theoretically giving these groups greater bargaining and purchasing power.

Subsidies for the Self-Employed:  Also starting in 2014, self-employed folks earning up to 400% of the poverty level will qualify for a federal subsidy which will help them to purchase healthcare. (In 2009, "poverty level" for one person was $10,830; for two people it was $14,570; and for a family of four, it was $22,050.)

Preventive Care Coverage to be Mandatory: As of September 2010, healthcare plans must cover basic preventive care.  Currently, some plans only cover catastrophic care.

Increased Taxes on Small Business Owners: Starting in 2013, small business owners who receive capital gains, dividend, or interest income will pay an additional 3.8% tax on that income.

Medicaid Coverage Expanded:  In 2014, a higher percentage of low income individuals and childless adults will be covered by Medicaid, which is the equivalent of a healthcare plan for the poor provided by the government.  This can impact small businesses in many ways, both positive and negative.