Health Insurance Tax Credit

Health care legislation passed in 2010 included a tax credit for small businesses that provided health care coverage for their employees. Recent surveys have shown that the majority of small companies that could qualify for the credit have failed to take it. The reasons given for ignoring the credit ranged from being unaware of it to finding the credit too complicated to compute.

* Take another look

If your business or nonprofit organization might be eligible, perhaps you should take another look at the requirements and be sure you’re taking advantage of this tax break. If you qualify, you can use this tax credit to offset your federal income tax liability by up to 35% of the cost of health insurance premiums you pay for employees. Since this is a tax credit, not a deduction, it will reduce your tax bill dollar-for-dollar.

* Can your business qualify?

In general, the credit is available to employers that have fewer than 25 full-time equivalent (FTE) employees paying average annual wages of less than $50,000 per employee. Eligibility is based partially on FTEs, not the number of employees; therefore, an employer with fewer than 50 half-time workers could qualify for the credit. The maximum credit goes to those employers with ten or fewer employees who pay annual average wages of $25,000 or less.

When you’re self-employed, either as a partner or a sole proprietor, or if you own more than 2% of an S corporation, you’re not considered an employee for purposes of the credit.

Tax-exempt organizations can use the credit to offset payroll tax liability (up to 25% of qualified premiums paid).

For assistance in determining eligibility for this tax credit and in doing the calculations to obtain the credit, contact our office.

2012 Tax Numbers!

STANDARD MILEAGE RATE for business driving remains at 55.5¢ a mile. Rate for medical and moving mileage decreases to 23¢ a mile. Rate for charitable driving remains at 14¢ a mile.

SECTION 179 maximum deduction decreases to $139,000, with a phase-out threshold of $560,000.

TRANSPORTATION FRINGE BENEFIT limit decreases to $125 for vehicle/transit passes and increases to $240 for qualified parking.

SOCIAL SECURITY taxable wage limit increases to $110,100. Retirees under full retirement age can earn up to $14,640 without losing benefits.

KIDDIE TAX threshold remains at $1,900 and applies up to age 19 (up to age 24 for full-time students).

NANNY TAX threshold increases to $1,800.

HSA CONTRIBUTION limit increases to $3,100 for individuals and to $6,250 for families. An additional $1,000 may be contributed by those 55 or older.

401(k) maximum salary deferral increases to $17,000 ($22,500 for 50 and older).

SIMPLE maximum salary deferral remains at $11,500 ($14,000 for 50 and older).

IRA contribution limit remains at $5,000 ($6,000 for 50 and older).

ESTATE TAX top rate remains at 35%, and the exemption amount increases to $5,120,000.

ANNUAL GIFT TAX EXCLUSION remains at $13,000.

ADOPTION TAX CREDIT decreases to $12,650 for adoption of an eligible child.

ALTERNATIVE MINIMUM TAX (AMT) exemption decreases to $33,750 for singles and to $45,000 for married couples.

 

Financial Health

Now is an ideal time to review your financial affairs. You have to gather information to prepare your tax return at this time. Why not take one more step and do something positive for your financial well-being? With our in-house certified financial planners we can take a look at both your tax and financial position to look at your overall “financial health”.

The following suggestions will get you started on your financial review:

*  Hold a discussion with your family. Spouses and children need to share and prioritize their financial aspirations.

* Write down your financial goals. How much money will you need to meet each goal? When will you need the money, and how will you get it?

* Do a net worth statement (a list of your assets and debts), and compare it to last year’s statement. Are you gaining or losing ground?

* With your goals (and the effects of inflation) in mind, review the performance of your investments.

* Take steps to protect what you already have. Goals may become instantly unobtainable if you lose your present assets or your income potential.

* Do you have adequate disability insurance coverage to replace take-home pay if you become incapacitated?

* Do you have the proper amount of life insurance if you or your spouse should die?

* Do you have replacement value property insurance on your home?

* Do you have adequate insurance for calamities such as automobile accidents or lawsuits?

* Make sure that you need all of the insurance that you have. Do not duplicate employer-provided coverage. Review your coverage annually; do not just automatically renew policies.

* Review your will and your estate plan. Did your situation change during 2011 (marriage, divorce, births, deaths, move to another state, for example)? This year, the top estate tax rate is 35% with a $5,120,000 exemption. Make appropriate changes to your will and estate plan.

* Review your credit use. Keep your credit card bills current. If you’re finding that hard to do, it’s probably time to cut up some of those credit cards and get your debt under control.

* Organize your records. If you had trouble assembling data for your financial review, you need a better system. Set one up.

For help with any aspect of your review, call us. We’re here to assist you in any way we can.