TO THE EDITOR:
The Aug. 30 Q&A on small business tax credit needs to be clarified in two areas:
• The article did not mention an important point about the tax credit provided in P PACA, as the health reform law is being called. Employers currently offering employee medical insurance take a business deduction for this expense. However, if they qualify for the tax credit they cannot continue this deduction. Bottom line at tax time — the business calculates their tax obligation using the deduction. They then calculate their taxes again, after taking the deduction out, and adding in the credit to see what it does to their tax obligation. They then can see which approach provides the most value to the business.
• P PACA also allows an employee to have their adult children stay on the firms medical insurance plan until they reach age 26. The law also allows the expense to the employer, if any, to be a tax deduction. In guidance on this, the IRS indicated when a person lives in a state where children can stay on their parent’s medical plan longer than up to age 26, the deduction can continue until Dec. 31 of that year. If they continue past Dec. 31, the cost, if any, becomes taxable income to the parent. The adult child of an employee living in a state, which does not continue past age 26, comes off the plan upon reaching age 26.
John C Parker
Government Relations Chair
National Association of Health Underwriters, Connecticut Chapter
Niantic
