home office tax issues

This past year was the first year that I was fortunate enough to work from my home. Working from my home has been a wonderful change for both personal and professional reasons. The only thing that caused a slight issue was the tax filing changes that I had to endure. The office in my home was now considered a tax deduction. I had to get some help learning how to deduct the things that are allowed on my federal taxes. If you are new to working from home and have a home office, this blog can help you learn what you need to know before tax time rolls around.

Taking A Tax Credit For The Cost Of Employee Health Insurance


Employee satisfaction can be enhanced by the receipt of health insurance coverage, but the expense usually only provides a basic tax deduction for a company. Some small businesses may be eligible for a more useful tax credit, based on the cost of health insurance provided to their employees. 

Most employers are well aware of the Affordable Care Act and many of its provisions. Much of the public awareness has focused on the online Marketplace for individuals, but the same website also offers health insurance coverage for small businesses. Some small employers are also eligible for a tax credit for insurance purchased through the online exchange.

ACA Marketplace for smaller employers

Businesses with less than the equivalent of 50 full-time employees are not subject to the so-called employer mandate of the ACA. Even though you are not required to provide employee insurance coverage, you may choose to purchase health insurance for employees through the government website. The Marketplace for small employers is named the Small Business Health Options Program and is referred to as SHOP.

The tax credit for the cost of employee health coverage applies only to insurance purchased through SHOP. Even though an employer with up to 50 workers can use SHOP, the income tax credit itself is available only to smaller businesses with less than the equivalent of 25 full-time employees. The amount of the tax credit can be as much as 50 percent of your cost of employee insurance.

Sliding scale credit reduction

The maximum tax credit percentage of 50 percent applies only to the smallest employers using SHOP. There is a sliding scale that reduces the credit percentage for businesses with more than 10 employees. The sliding scale also reduces the credit percentage if the average annual wages of your employees exceeds $25,000.

The effect of the sliding scale is to gradually phase out the tax credit as the number of employees or the average wage level increases. An online calculator is available at the Marketplace website to estimate the amount of your tax credit. Unlike a tax deduction, a credit is a direct offset of income tax otherwise payable.

The tax credit may be taken for up to two years, but the two years must be consecutive. If the credit exceeds the amount of your income tax, the unused portion of the credit may be carried back or forward to offset income tax in a different year. Contact an accountant (such as one from Bliss & Skeen CPAs) for more information about the tax implications of providing health insurance to your employees.


29 December 2015