Do you know the ACA tax Advantages?

December 9, 2015

We’ve all heard a lot of complaints about changes under the ACA, but are you aware of some of the tax advantages to you or your business under these plans?



For companies that offer High Deductible Health Plan (HDHP) with a Health Savings Account (HSA), both the company and their employees can save.


For the company, any contributions made to the employees account is deductible.  


For the employee, the company contributions are not taxable income and the employee contributions to the plan are also a tax deduction- though there is a limit: in 2015 the self-only plan contributions were limited to $3,350 and the family plan were limited to $6,650, though those over 55 years of age can contribute an additional $1000 under either plan. In 2016 these limits are moving up to $6750 for the family with no change to the individual plan. Be careful of excess contributions are there are penalties if not withdrawn in time. For 2015 contributions, contributions can be made up until April 15, 2016 and still be included.


Withdrawals from the HSA for qualified medical expenses are not taxable and you can keep the money in the plan indefinitely. These accounts act as tax free savings. You can also roll-over funds from one HSA to without being taxed.


There are special rules for partnership contributions to partners and S-Corp contributions to shareholders.  Contributions from a partnership to a partner are generally treated as a distribution and are not included in the partner's gross income. However, contributions to a partner's HSA for services rendered are guaranteed payments which would be a deduction for the partnership but gross income to a partner, though the partner can deduct the contributions made to their HSA.


Similarly, contributions by an S corporation to a 2% and higher shareholder-employee's HSA for services rendered are also treated as guaranteed payments with the same tax treatments as described above.


See IRS Publication 969 for more information.


SHOP credits


Did you know? A tax credit is available to small business employers for the first two years in which they purchase health insurance through the government exchange (SHOPs).


Who qualifies?

  • Companies with less than 25 full-time equivalent (FTE) employees

  • The average employee salary is $50,000 per year or less

  • The company pays at least 50% of FTEs’ premium costs

  • The company offers coverage to FTEs through the SHOP Marketplace- the company is not required to offer coverage to those employees working less than 30 hours per week.

The tax credit is worth up to 50% of the company contribution toward the FTEs’ premium costs. For a non-profit employer, the credit is worth up to 35% of the contribution.

Find out more at


Archer MSAs


An Archer MSA is a tax-exempt trust account held with a bank or an insurance company in order to save money for future medical expenses. Benefits:

  • You can claim a tax deduction for contributions you make.

  • The interest or other earnings on the assets in your Archer MSA are tax free.

  • Distributions are tax free if you pay qualified medical expenses.

  • Like an HSA, the contributions remain in your account until you use them.

  • An Archer MSA is not tied to a particular employer but stays with you even in retirement.

To qualifying for an Archer MSA you must be either:

  • An employee (or the spouse of an employee) of a small employer  with a

  • A self-employed person (or the spouse of a self-employed person) who maintains a self-only or family HDHP.

  • You have no other health or Medicare coverage except what is permitted under “Other health coverage”, which includes long term care coverage, disability, dental and vision.

For more on Archer MSAs see pages 11-14 of IRS Publication 969.


Keep in mind that there is also still an option for lower income individuals to purchase through the Marketplace and qualify for a subsidy if none of the above options are available. To not have insurance can really cost you.


In 2015 the penalty rose to $325 per adult or 2% of household income. In 2016, the amounts are $695 per adult, $347.50 per child under 18, or 2.5% of household income, at a maximum of $2,085. For partial year coverage, the fee is 1/12 of the annual amount for each month you (or your dependents) don’t have coverage. There is an exemption if you’re uncovered only 1 or 2 months where you will not have a penalty.


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