Obamacare Small Business Tax Credits Aren't Such a Sure Thing

Lots of paperwork, lots of conditions, and get a load of that fine print


HONOLULU — 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 that the tax credits aren't guaranteed.

Small businesses can only qualify to receive the tax credits for two years, there is extensive paperwork to fill out, and they will only benefit if they made enough of a profit to 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 wasted time and effort," Baker said.

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, step children, 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."

Baker said the small business health care tax credit was established some time ago, but it has not proven popular because of its complexity and quick phase out.

State Insurance Commissioner Gordon Ito told Hawaii lawmakers last week during a five-hour special briefing that small businesses only will be allowed to choose from the priciest plans on the local exchange.

Both individuals and small businesses eventually will be able to sign up on the exchange and compare pricing and options for 95 different dental and medical plans, but the exchange's full launch has been thwarted by a series of technical and administrative gaffs.

Coral Andrews, executive director of the Hawaii Health Connector, told lawmakers at the Wednesday special briefing she hopes the plans and pricing will be available online by Tuesday, but she couldn't guarantee it. Not one person in Hawaii has been able to sign up for a health care plan via the Hawaii Health Connector since its launch on Oct. 1.

This article originally appeared on Watchdog.org

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  1. The bureaucrats devising all aspects of Obamacare must have been paid according to a complexity chart. The more complex and unworkable the higher the bonus.

  2. OT (sorta):
    “Genentech invests $285 million in biotech in state”
    Lefty columnist touts it as proof CA isn’t business-toxic!
    Except moonbeam gave ’em special dispensation on a lot of taxes, the businesses aren’t likely to have enviro concerns and the employees are already skilled enough to be beyond the state’s legal benes.
    So, yes, so long as the state removes the problems and the businesses are ‘just right’, why, you can do business in CA! If you are a black or brown kid looking for work, tough.

    1. It’s like the NanoFab in New York, 100Million in tax breaks (plus other concessions on top of that) for 200 jobs, for the sake of headlines.

      1. The columnist in this case is touted as a ‘business columnist’; he’s a lefty propagandist and nothing more.
        Regardless of the subject, it’s always ‘the gov’t is helping!’

  3. …Commissioner Gordon…

    Heh heh.

  4. I wasn’t.

  5. “small businesses only will be allowed to choose from the priciest plans on the local exchange.”

    Sounds like the recent thing by Government Motors. Raise the price by $X and then offer a $X discount, or in this case a tax reduction (which you probably won’t qualify for).

  6. “… writes Malia Zimmerman

    Uh, RACIST…?

  7. and they will only benefit if they made enough of a profit to benefit from the tax credit

    So it is a big business tax credit.

    1. article explains that it’s non-refundable. So after the small business is forced to purchase the priciest plans, if somehow they can manage to still turn a profit, then they can get their tax on that profit lowered. No profit, no credit.

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