There continues to be much uncertainty about the Affordable Care Act and how such uncertainty will impact health care costs. So it’s critical to leverage all tax-advantaged ways to fund these expenses, including HSAs, FSAs and HRAs. Here’s how to make sense of this alphabet soup of health care accounts.

HSAs
If you’re covered by a qualified high-deductible health plan (HDHP), you can contribute pretax income to an employer-sponsored Health Savings Account — or make deductible contributions to an HSA you set up yourself — up to $3,450 for self-only coverage and $6,900 for family coverage for 2018. Plus, if you’re age 55 or older, you may contribute an additional $1,000.

You own the account, which can bear interest or be invested, growing tax-deferred similar to an IRA. Withdrawals for qualified medical expenses are tax-free, and you can carry over a balance from year to year.

FSAs
Regardless of whether you have an HDHP, you can redirect pretax income to an employer-sponsored Flexible Spending Account up to an employer-determined limit — not to exceed $2,650 in 2018. The plan pays or reimburses you for qualified medical expenses.

What you don’t use by the plan year’s end, you generally lose — though your plan might allow you to roll over up to $500 to the next year. Or it might give you a grace period of two and a half months to incur expenses to use up the previous year’s contribution. If you have an HSA, your FSA is limited to funding certain “permitted” expenses.

HRAs
A Health Reimbursement Account is an employer-sponsored account that reimburses you for medical expenses. Unlike an HSA, no HDHP is required. Unlike an FSA, any unused portion typically can be carried forward to the next year.

There’s no government-set limit on HRA contributions. But only your employer can contribute to an HRA; employees aren’t allowed to contribute.

Maximize the Benefit
If you have one of these health care accounts, it’s important to understand the applicable rules so you can get the maximum benefit from it. But tax-advantaged accounts aren’t the only way to save taxes in relation to health care.

If you have questions about tax planning and health care expenses, please contact us.

With rising health care costs, claiming whatever tax breaks related to health care that you can is more important than ever. But there’s a threshold for deducting medical expenses that may be hard to meet. Fortunately, the Tax Cuts and Jobs Act (TCJA) has temporarily reduced the threshold.

What expenses are eligible?

Medical expenses may be deductible if they’re “qualified.” Qualified medical expenses involve the costs of diagnosis, cure, mitigation, treatment or prevention of disease, and the costs for treatments affecting any part or function of the body. Examples include payments to physicians, dentists and other medical practitioners, as well as equipment, supplies, diagnostic devices and prescription drugs.

Mileage driven for health-care-related purposes is also deductible at a rate of 17 cents per mile for 2017 and 18 cents per mile for 2018. Health insurance and long-term care insurance premiums can also qualify, with certain limits.

Expenses reimbursed by insurance or paid with funds from a tax-advantaged account such as a Health Savings Account or Flexible Spending Account can’t be deducted. Likewise, health insurance premiums aren’t deductible if they’re taken out of your paycheck pretax.
Continue Reading TCJA temporarily lowers medical expense deduction threshold

Tax credits reduce tax liability dollar-for-dollar, potentially making them more valuable than deductions, which reduce only the amount of income subject to tax. Maximizing available credits is especially important now that the Tax Cuts and Jobs Act has reduced or eliminated some tax breaks for businesses. Two still-available tax credits are especially for small businesses that provide certain employee benefits.

1. Credit for paying health care coverage premiums

The Affordable Care Act (ACA) offers a credit to certain small employers that provide employees with health coverage. Despite various congressional attempts to repeal the ACA in 2017, nearly all of its provisions remain intact, including this potentially valuable tax credit.

Continue Reading Tax credits just for small businesses may impact your 2017 and 2018 tax bills

Russ: This is PKF Texas The Entrepreneur’s Playbook. I’m Russ Capper, this week’s guest host. And today I’m here, once again, with Jeff Toal, CEO of Med-Enterprise. Jeff, welcome back to The Playbook.

Jeff: Thank you for having me back.

Russ: You bet. Well, I find your business fascinating. And I’m just curious. What trends did you see in healthcare, in the medical world, that motivated you to start the company?

Jeff: That’s a good question. I think it was one of the concerns – that with the evolution of the policies that were going on in healthcare, I kept seeing a sense that projects were changing and shifting. And it was losing the focus on capturing money and accounting for it accurately. So I kept seeing money left behind. So we took the opportunity of that technology I mentioned before and did some pilot testing with it, and we actually were finding money that was being left behind. Because there was that distraction to the newer trends that were going on. So we came back in, used a newer technology to capture what was missing.

Russ: Well, it definitely is a rapidly evolving space – and complex. And you are solving there?

Jeff: We are. It’s a fascinating – in a lot of ways, we’re actually helping to find money to fund projects that are dear to the hearts of our providers and healthcare system. So it’s a nice balance of finding money, so that they can move their initiatives forward.

Russ: Really cool. And I really appreciate you sharing this story with us.

Jeff: Thank you for having me.

Russ: You bet. And this has been another Thought Leader Production, brought to you by PKF Texas and The Entrepreneur’s Playbook. Tune in next week for another chapter.

The U.S. Department of Labor’s Employee Benefits Security Administration today announced an upcoming webcast. “The Affordable Care Act: How Will It Affect Me?” will take place Thursday, Aug. 29 from 1-2 p.m. EDT. EBSA staff will be joined on the webcast by colleagues from the Department of Health and Human Services.

The webcast discusses the impact of the ACA (Affordable Care Act) on group health plans. This is especially important for those companies of 50+ employees that have never had medical coverage. These companies will also learn about the Health Insurance Marketplace where they will find affordable, compliant providers.

IRS creates “Healthcare Law Online Resources” site and Publication The IRS has posted Publication 5093, Healthcare Law Online Resources, on its website. The page has a section for employers as well as individuals that has links to employer resources for information on health insurance, tax/legal responsibilities, and small business resources.

The link to health insurance information has a quick survey to help employers and individuals get to the best plans and prices for their needs.  The Small Business Health Options Program (SHOP) is a new way for a small business to buy high-quality health insurance for its employees. The Marketplace opens for business on Oct. 1, 2013.

The tax benefits and responsibilities link goes to the IRS webpage for Affordable Care Act (ACA) tax provisions.

The link to small business resources contains information from the SBA.gov site on the key provisions in the ACA.

The link for legal guidance on the labor provisions is to the U.S. Department of Labor’s webpage on the ACA. The web page includes ACA regulations and guidance.

The U.S. Government business portal link includes a link where employers may learn about the new health care changes. There is a wizard that asks a series of questions (e.g., “How many full-time equivalent employees do you have?”) to help employers determine how they are affected by the new health care law.

Thanks to RIA Payroll Newsletter for up-to-the minute tips on this quickly development for large and small employers alike.

January 1, 2014 (as of now, anyway) the Health Insurance Marketplace will open, meaning more work on the employers part for providing health insurance to employees.

Open enrollment begins October 1, 2013. If I wasn’t in payroll, I wouldn’t have a clue about this. There’s been little media coverage, and the Department of Labor (DOL) isn’t known for their promotional expertise.

The Affordable Care Act created new requirements for FLSA that say the employer must provide a notice with specific information to employees about the Marketplace. This notice has to be provided by October 1, 2013.

What has to be on the notice? A model letter is available at www.dol.gov/ebsa/healthreform/ . It’s a bit lengthy at 3 pages, but it seems very comprehensive. You can get more information on Healthcare.gov .

Greg: This is PKF Texas, the entrepreneur’s playbook. I’m Greg Price, director of consulting solutions and I’m here again with Tina Winograd, a payroll specialist in our accounting department at PKF Texas. Tina, the last time you were here, you talked about some provisioning coming as it pertains to the Affordable Care Act. Is that true?

Tina: Yes, the employer shared provision of the Affordable Care Act is schedule to start in 2014, but employers need to prepare this year.

Greg: What are the employer’s shared responsibilities provisions?

Tina: Well, its purpose is to encourage business owners to provide affordable, quality health insurance to full time employees, and full time being 30 hours.

Greg: Can you give some more specifics about that?

Tina: First off, it only affects employers with 50 or more full time or equivalent employees. The look back period to determine the employee count is this year, 2013. The health coverage also must be offered to at least 95 percent of its full time employees and provide minimum value, meaning the employer covers at least 60 percent of the cost.

Greg: So what happens if an employer decides they don’t want to offer health care insurance? What happens then?

Tina: Then the company will be penalized based on a set calculation and that subject itself can be a whole show on its own.

Greg: Yeah, I’ve heard a little bit about that. We’ll probably have you back another time to talk about that and then I think another thing people are looking for are these affordable insurance exchanges. Is there a place where we can direct people to get more information about that?

Tina: Yes, the Department of Health and Human Services is developing rules for the exchanges. More information will come later. Now, this may be a good time for employers wavering on offering health insurance to follow through.

Greg: Tina, thanks for providing that information. I know I learned something about the shared responsibilities act today and I know that our viewers will as well. Thank you. This has been another Thought Leader Production brought to you by PKF Texas, the entrepreneur’s playbook. Tune in next week for another chapter and if you’d like to get more information about this key provision of the affordable care act, go to PKFtexas.com/taxnews.