Health Insurance for Small Business Owners

Health-Care Tax Relief for the Self-Employed

If you are self-employed and your business is a sole proprietorship, single-member LLC, or sole-owner S-corp, you can indeed deduct your health insurance expenses for 2010. This one-year provision is not a part of the health-care reform bill that passed in March, however. It was included in the Small Business Jobs and Credit Act that President Barack Obama signed into law just last month.

“In this economic climate, any kind of bottom line tax savings is helpful,” says Kristie Arslan, executive director of the National Association for the Self-Employed, a Washington-based lobbying group. “This is one of the few small business provisions that’s been passed where business owners will actually see lower taxes on Apr. 15, 2011.”

Her organization has championed the deduction for more than eight years and unsuccessfully tried to get it included in the health-care reform law.

he new provision corrects what Arslan calls a fundamental unfairness: Self-employed individuals cannot deduct the full cost of health insurance premiums as a business expense on their payroll taxes, as other business entities can do.

Although the new law authorizes the deduction only for 2010, Arslan says it’s “a foot in the door” for self-employed individuals, who pay both the employer and employee portions of the payroll tax—a self-employment tax totaling 15.3 percent. Employees typically pay half that amount (7.65 percent) and their employers cover the other half as part of their payroll taxes. The new deduction exempts solo business owners from paying self-employment tax on the portion of their income that they spend on health premiums. “This is a step in the right direction. We’re hoping to extend it and make it permanent,” Arslan says.

Source: Bloomberg Businessweek

Starting a Small Business

Why You Should Hurry Up and Start a Small Business Already

If you’ve been thinking about starting a small business, you might want to take the plunge before the end of the year. Why? Goodies in several recently passed new laws offer tax breaks that were previously unavailable to entrepreneurs.

Here’s a quick summary of some of the breaks you and your investors could take if you start a business in 2010:

  • Only this year, you can deduct $10,000 of startup costs, double the previous figure.
  • Write off 100 percent of up to $500,000 in equipment costs your first year. If you have costs beyond there, you can write off 50 percent of them right away under the bonus depreciation clause.
  • Investors can sell qualified business stock between March of this year and January 2012 tax-free. Any profit is also exempt from the dreaded Alternative Minimum Tax.
  • Take a 35 percent tax credit on your company’s health-insurance premiums.
  • Your local community bank may have more money to lend you, thanks to $30 billion in new federal funding for small-business loans.
  • Take a $2,500 hiring credit if you hire a qualified worker this year, or $5,000 next year.
  • Get a credit up to $5,000 if you hire

There’s more, but this gives you some of the highlights. Consult your tax professional for details on all the many ways your startup can benefit from the tax breaks in new federal laws.

Source: Entrepreneur.com