Last-Minute Year-End Medical Plan Deductions and Credits
Every small business owner with one to 49 employees needs a medical plan for their company.
The law does not force you to have a plan if you have 49 or fewer employees, but you should.
Most medical plan tax regulations are simple when you have 49 or fewer employees.
Here are 6 alternatives for you to think about:
- Don’t forget to submit your application for the federal tax credit, which equals 100% of the obligatory and optional emergency sick leave and emergency family leave payments. Most likely, you qualify for the credit.
- If you have a Section 105 plan set up but haven’t been paying out reimbursements monthly, process the payments to obtain your deductions for 2022 and start paying out reimbursements monthly in 2023.
- If you wish to adopt a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA), be careful to do it appropriately immediately if you still need to do so. As a result of your delay, you may be subject to the $50 charge per employee.
- However, the Individual Coverage Health Reimbursement Arrangement may be better if you consider providing your employees with additional money and flexibility (ICHRA). It offers greater benefits.
- If you run your business as an S corporation and want to deduct the cost of your health insurance from your taxable income, the S corporation must (a) pay for or reimburse you for the insurance and (b) record the expense on your W-2. Ensure the reimbursement occurs before December 31 and is configured to appear on the W-2.
- Submit a tax credit claim for the group health insurance you provide to your staff. Evaluate whether your pay structure and employee count put you in a position to claim a 50% tax credit for some or all of the money you spent on health insurance in 2022.
We can help you determine the best way to structure your healthcare expenses to get the most out of your tax break.