October 31, 2014

Ensuring America’s Small Businesses Get a Fair Deal on Tax Day

Business owners often have to make tough decisions when it comes to their bottom lines. Unfortunately, for many self-employed and micro-businesses, health insurance has become a luxury item – purchased when times are good and given up during times of belt-tightening. A contributing factor to this “unhealthy” reality is the fact that the self-employed do not receive a tax benefit for purchasing coverage, unlike every other type of business entity, which can write off the cost of health insurance as a business expense.

Congress passed a temporary reprieve of this minor quirk in the tax code that has a major effect on our nation’s smallest businesses when it passed the Small Business Jobs Act last fall. For the 2010 tax year, self-employed business owners are able to deduct the cost of their health care coverage, which will put about 15 percent of their premium back in their pocket. The average self-employed business owner, who pays about $3,000 a year in health insurance premiums or $6,300 for family coverage, will save $456 to $962 in taxes on this year’s deduction.

Health Insurance TaxA large business might not notice such a relatively modest amount of extra cash on its books, but this is not an insignificant amount to a self-employed business owner. The temporary health care tax deduction could help pay for an extra phone line or fund some online advertising. It could be used to purchase new office equipment or pay for an energy efficient lighting upgrade. These are tangible benefits to small businesses that can help them stay competitive — and in business — in an economy that continues to shun robust recovery.

With the ups and downs of our current economy, this extra savings could be the extra help a struggling business owner needs. Approximately 23 million self-employed business owners across America are eligible to claim the temporary self-employed health care tax deduction this year.

But here’s the rub. Congress only gave self-employed business owners the 2010 tax year to claim this deduction. An overwhelming number of the potential beneficiaries of the deduction won’t be able to take advantage of the deduction because health coverage is a luxury they can’t currently afford. Self-employed business owners need Congress to make the deduction permanent and make the tax benefit of purchasing coverage fair to all business entities.

According to the latest available data, 23 million small business owners contribute nearly $1 trillion to our nation’s economy. What these businesses need is more than just lip service from President Obama and Congress, who both are proclaiming that it’s the small business community that will put our economy back on track. These businesses don’t need another major piece of legislation: Thoughtful tweaks to existing law will help small businesses stay afloat and expand.

The temporary self-employed health care tax deduction is a step in the right direction, but making it permanent is just one of the little fixes our policymakers can address to support the small business community.

3 Comments ▼

Kristie Arslan


Kristie Arslan Kristie Arslan is the President and CEO of the National Association for the Self-Employed (NASE). NASE represents the interests of America’s 23 million small businesses – the self-employed and micro-business.

3 Reactions

  1. That is just the beginning of what Congress can do to help small businesses (and thus the whole US economy!). I suppose it is a start though…

  2. I benefited from the deduction in 2010 and hope they continue it. It makes sense to give a break to those purchasing their own insurance.

  3. In 2009 Goldman Sachs made a reported $2billion in profit and paid not a red cent in taxes. They have the virtually the same tax code as the one-person shop to deal with, but hiring a couple CPA snd tax lawyers to figure out how to keep from paying is well worth it for them.

    We are very sensitive as a nation to ensure that our individual tax system is not regressive and that those who make the most pay the most. But when it comes to businesses, it’s just the opposite – those who make the least tend to pay the highest percentage of their revenue in taxes. We need to fix the regressive tax code to get Giant Corporation, Inc. to start paying again and truly help the small business owner like we help the lower income workers.

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