Small Business Year-End Healthcare Options

 In health insurance

insurance-iconFor any business, it’s critical to have a systematic, organized and easily implemented plan for coordinating and syncing your taxes with your healthcare expenses. Taxes and healthcare arrangements are more connected and dependent on each other than most small business owners and shareholders think. In fact, myriad entrepreneurs are oblivious to the notion that small businesses have a plethora of more healthcare options than their larger peers and competitors; they have more ways to leverage healthcare costs to their advantage than any other business segment in the country.

Also, let’s not forget that if your company has medical out-of-pocket costs exceeding $5,000 in a tax year, including costs for co-pays, premiums, deductibles, specialists, dental, optic and more, understanding the details and planning ahead could be even more beneficial.

At Thomas Huckabee, CPA of San Diego, California we realize the importance of year-end planning and strategy development in general, but particularly in the healthcare arena. Please note that specified insurance enrollment deadlines are December 15, 2018, while others are December 31, 2018.  If you are looking to save thousands of dollars as a small business owner, read on as we discuss your options for plans of action.

Picking the Best Health Insurance Plan

As if choosing the right healthcare plan wasn’t confusing enough, we now have what has been called the “enrollment period.”  The enrollment period begins on November 1 of this year and continues through December 15, 2018. So, basically your business is trying to make sure what makes the most sense, from a tax standpoint of 2018 taxes, in tandem with choosing what is best for 2019.  

It’s critical to understand the difference between what are dubbed “metal” plans- they are dubbed this because there is a choice that everyone will have: picking a bronze, silver, gold or platinum plan.  Each plan has different premium coverage and, thus, different costs for deductibles, general benefits and premiums. Bronze plans generally have the highest deductibles but are also the most affordable as they open the door to the health savings account (HSA.)  Alternatively, Platinum plans include the best benefit and the insured has the lowest deductible.

Do be on top of the enrollment options available in your demographic.   Are you using Are you using a particular state exchange? Although excellent places to begin, recall that you are not just stuck with these two exchanges. Shop around! Advocate for your business!  Most importantly, don’t forget that open and private markets still exist and, so far, they are on the upswing.

Very few healthcare shoppers understand that the “network” is the real issue. As you investigate, you will be shocked to learn the wide range in premiums combined with the numerous types of “metal” plans. The reason isn’t the exact benefits provided — it’s the network of doctors that come associated with a particular plan.  Most shoppers are oblivious that the savings under certain policies are because the healthcare company offers a smaller network of doctors under the plan, and it may lack specific benefits like dental or vision.

REMINDER: No penalty will be assessed in 2019 for lacking any qualifying insurance.  

Use the Tax Credit for Employees’ Healthcare

Should you absorb any portion of your respective employees’ health insurance premiums, the Small Business Healthcare Tax Credit for Small Employers is right up your alley. The Small Business Healthcare Tax Credit for Small Employers is a literal dollar-for-dollar tax credit against any taxes your small business owes the IRS, for up to 50 percent of any healthcare premiums you pay for your employees. Some caveats apply but your accountant can easily review those with you.

REMINDER: When the fourth quarter rolls around, reassess the healthcare choices for your employees that begin January 1, 2009; make certain you qualify for the tax credit you can garner from properly making payments for your employees.

Health Savings Account (HSA) Methods

As popular as ever, health savings accounts (HSAs) are becoming a favorite for small business owners.  HSAs allow for far more creativity and control over the healthcare insurance plan itself. Qualification is dependent on whether or not you are enrolled in a high-deductible health plan (HDHP)- you must be- and the condition of your current health, which must be good.  

The attraction of HSAs is that HSA  fees are deductible from your gross compensation.  What does this mean? It means lower taxes, and a possible a lower tax bracket for your earnings!

2018 allows for a tax deduction up to In 2018, the tax deduction is up to $6,900 for families and up to $3,450 for single filers. It doesn’t stop there though…unused funds aren’t taken away, they roll over into your account for the future and coming years.  

Money can be spent tax-free on qualified medical expenses, and funds are invested in a manner similar to the way that you can invest the money in much the same way you do with your personal IRA. Real estate expenses are sometimes even approved.

Critical and important distinctions from other healthcare options surround HSA  deadlines in 2018 or 2019. Keeping in mind that open enrollment began November 1, 2018, be aware that there is a set-up deadline in addition to a funding deadline:

  • December 15, 2018 – Deadline to get an HDHP so to qualify for a contribution and subsequent deduction next year.
  • April 15, 2019 – Deadline to contribute to your HSA this year so to receive a deduction on your 2018 return.

REMINDER: Always pick the correct insurance for 2019, even though you need to make a decision in 2018.  If you do not do this by December 15, 2018, you will not get the deduction you are waiting for in 2019.  Contributions that qualify, however, are permitted up until April 15, 2019.

Claiming Health Deductions Correctly

Claiming deductions is an enormous benefit for entrepreneur and small-business- owners which can’t be taken advantage of by taxpayers.  Health insurance coverage is 100% entirely deductible for small-company owners, despite the presence, or lack thereof, of employees. A regular American would actually have to itemize medical expenses.  

An S-Corp is required to report the payment of its health insurance in a very detailed and specific manner.

REMINDER:  S-Corp owners issuing final W-2 for the year need in question to document the amount of health insurance paid by the business to qualify for the deduction.


Thomas Huckabee, CPA of San Diego, California recognizes that many options exist when it comes to choosing the right CPA, particularly when it comes to healthcare and taxes. And, the right CPA is essential and needed to guide your business and you through understanding the ins and outs of healthcare.  Operating a full-service accounting firm, Tom guides clients through the complicated process of medical benefits, the options that exist and the strategy which works best for an optimized small business.   


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