I have a small business, but I am worried about my employees’ health. What are my options?
One of the biggest concerns for any small business, whether LLC or S-Corp, is making sure that your employees’ possess adequate insurance. Whether it’s an HSA or an HRA, it is vital for a small business to offer health insurance to its employees. It also comes with many benefits.
What is the Small Business Healthcare Tax Credit?
According to IRS.gov, The Small Business Healthcare Tax Credit is a credit that is available to businesses with fewer than 25 full-time employees.
While there are many qualifying factors for this credit, it is available to get more money back for your business and your employees.
Small business owners can also deduct much of their health insurance expenses; in addition, they can also deduct their HSA or HRA accounts as a business expense.
What is an HSA?
According to Healthcare.gov, HSA stands for Health Savings Account, which is “a type of savings account that lets you set aside money on a pre-tax basis to pay for qualified medical expenses”.
here are three significant tax advantages to having an HSA account, according to HSA Center. They are:
“Cash contributions to an HSA are 100% deductible from your federal gross income”
“Interest on savings accumulates tax-deferred”
“Withdrawals from an HSA for “qualified medical expenses” are free from Federal Income Tax”
What is an HRA?
According to Healthcare.gov, HRA stands for Health Reimbursement Account, which is an “employer-funded group health plans from which employees are reimbursed tax-free for qualified medical expenses up to a fixed dollar amount per year”.
How do I know whether to choose an HSA or an HRA?
According to PeopleKeep.com, these are a few things that separate an HSA from an HRA:
An HRA is an employer-sponsored plan while an HSA is an individual account that an employer can contribute to.
HSA’s are actual accounts and belong to the employer, even if they leave the company. An HRA belongs to the employer.
HSA’s don’t cover health Insurance premiums.
Learn More About Small Business Health Benefits
While both of these options offer tax benefits as well as providing coverage for your employees, one must look into which would be the best option for your business.
Contact us for more information.