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23 March 2012


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Another Way For Businesses In Alabama To Reduce Cost

(Alabama Insurance Premium Reduction)

Small businesses in Alabama can take advantage of the Small Business Health Insurance Premium Deduction Enhancement Act to reduce the cost of doing business.  Act 2008-559 came into effect early this year.  It allows small businesses and their employees to take an additional 50% deduction on their company provided health insurance premiums. 

Under the new law small businesses with less than 25 employees that provide a health insurance plan to their employees can take a 50% deduction in their contributions to the premiums.  Employees of these small businesses can also claim the 50% deduction on their contributions.  This 50% deduction is in addition to what is currently allowed.

Employees can also claim the 50% deduction if they have a Health Savings Account (HSA)

Only full-time employees are considered when determining the number of employees for this deduction.  Part-time employees are not considered as qualifying employees.  Small businesses with part-time and full-time employees will only count the number of full-time employees when determining the total number of employees. 

However, for both the employer and employee to claim this deduction they can do so only for employees that earn no more than $50,000 of wages and report no more than $75,000 ($150,000 if married filing a joint return) of adjusted gross income on the Alabama individual income tax return for the applicable tax year.  These individuals are labeled as “qualifying employees”.  Those who earn above the specified amounts are labeled “non-qualifying employees”.  Both qualifying and non-qualifying employees are counted in determining the number to be considered for the total number of employees.

The spouse and children of a sole proprietor are not counted in the number of employees for qualification purposes.

he Small Business Health Insurance Premium Deduction Enhancement Act (Act 2008-559)

By Tim Miller




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