This content was created by balanced-griffin. This content was uploaded by balanced-griffin. This is a YouTube video titled "Small Employer Health Insurance Tax Credit for Painting Business" (created 2016-07-20) featuring Daniel from BookkeepingForPainters.com. It is an instructional/tax guidance video for small painting-business owners that explains the Small Employer Health Insurance Tax Credit (SHOP): eligibility rules (fewer than 25 full-time employees, average wages under $52,000, employer pays at least 50% of premiums, purchase through the SHOP/healthcare.gov marketplace, and 70% employee participation), and a step-by-step example calculation showing how a business paying $25,000 in employer-paid premiums could receive a $12,500 credit. The video also points viewers to bookkeepingforpainters.com for further resources.
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Hi, this is Daniel from BookkeepingForPainters.com, and this video is about claiming the Small Employer Health Insurance Tax Credit. So the purpose of this video is basically to go over the tax credit basics and then review the eligibility for the tax credit and then review the actual savings that you can capture by by taking this tax credit. So the basics of this tax credit, this tax credit basically allows small businesses to claim up to 50% of the cost of health insurance premiums paid for employees as a tax credit. Obviously, there's some eligibility requirements involved which I'll review, and you must go through the healthcare.gov shop website, which I will show you as well. So let's discuss eligibility. You have to have fewer than 25 full-time employees. So a full-time employee, according to the IRS, is an employee that works on average of 30 hours or more a week or 130 hours a month. So you have to have no more than 25 full-time employees in your painting business. Number 2, you have to pay an average salary of less than $25,000— or I'm sorry, $52,000 a year. So the way you determine this is basically you add up all your wages that you paid out during the year. Let's say it's $200,000 and you divide it by the number of full-time employees you have. So $200,000 divided by your 10 employees equals $20,000 as an average yearly wage that you've paid out per employee. So it has to be under $52,000. Number 3, pay at least half of the employee health insurance premiums. So you basically got to at least cover half of the employee's health insurance premiums. You can pay more than 50%, but at least 50%. Number 4, purchase the healthcare.gov coverage through SHOP Marketplace on healthcare— is basically going through the healthcare.gov website for small businesses. And the last one is ensure that 70% of employees have healthcare coverage in your business. So this is actually a SHOP requirement. Healthcare.gov requirement. And basically what that means is if you have— let's just use an example— if you have 10 employees, at least 7 of them need to either already have health insurance or get health insurance through your health insurance program. All right, so now we've discussed the eligibility, let's move on to the actual calculation to see how much you're actually gonna save by using this tax credit. So healthcare.gov has a website where you can actually calculate the tax, the amount of the tax credit. You just go to this website listed here, and this is it. So it's 6 steps, pretty simple, walk through an example. Step 1, are you a tax-exempt employer? So in this as a painting business, you are not tax-exempt. How many employees work 40 hours or more a week? This is about full-time employees. As I discussed earlier, the IRS uses 30 hours. I would default to them as the authority, but let's just say that you have 10 full-time employees. How many hours —will your part-time employees work during the applicable year? Let's just say you don't have any part-timers for simplicity. Step 4, what are your total estimated wage—wages for the applicable tax year? Total wages, so let's just say that $250,000 is the amount of wages you paid out in total during the year. And then Step 5, did you pay at least 50%? Yes, because you have to pay at least 50% to claim this credit. So make sure you're paying at least 50%. And then step 6, what is the total estimated amount you will pay towards premiums during the applicable year? So this is basically asking how much are you paying for your employees' healthcare coverage. So let's just do a quick— let's just say that you have, you have 10 employees and they're all covered under the same plan and it costs $5,000, so the total cost is $50,000. But let's just say that you're only covering half the cost, so $25,000 is the amount of premiums that you're paying on behalf of the employee. So you paid $25,000, show results. So you paid out total premiums of $25,000, but you got a tax credit of $12,500, which is 50% tax credit. So that 12— so you're effectively, the amount of premiums that you paid are effectively being cut in half, saving you $12,500. So that's a huge savings, and if you're considering doing a health insurance program or you're looking at some benefits to include for your employees, highly recommend looking at this tax credit and using this video as your guide. If you are interested in some more tax tips and bookkeeping tips for your painting business, make sure you check out bookkeepingforpainters.com/free-ebook, and I hope this video helps out, and have a good day.
