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“As the Executive Director of a non-profit organization I can attest to the professionalism, quality and thoroughness of the services performed by Wilkins Miller Hieronymus. Not only has this firm provided financial auditing for the last four years but their staff has always been readily available for any questions or concerns and have followed up with knowledgeable recommendations.”

Sherrin A. Puckett
Team Focus, Inc.
 
Alabama Small Business Health Insurance Premium Enhanced Deduction

During 2011, the Small Business Health Insurance Premium Enhanced Deduction Bill was amended. This amendment is effective for tax years beginning after December 31, 2010 and increases the deduction for “qualifying employers” from 150 percent to 200 percent of their group health insurance costs provided to “qualifying employees.” The law also allows “qualifying employees” to deduct from their state taxable income an additional 100% of their group health insurance premiums paid.

To determine if you and your employees qualify, please follow the steps below:

1. Did you have less than 25 fulltime employees on the last day of the tax year?
a. No – Stop – you do not qualify for the deduction
b. Yes – You are a “qualifying employer.” Go on to Step 2.

2. Did you have a group health insurance plan and employees who were residents of Alabama and to whom you paid wages of $50,000 or less for the tax year?
a. No – Stop – you do not qualify for the deduction
b. Yes – Go on to Step 3.

3. Inform the employees earning $50,000 or less that you are a “qualifying employer.” In order for you and the employee to take the deduction, the employee must certify to you that they report no more than $75,000 of adjusted gross income (AGI) on their Alabama individual income tax return ($150,000 if married filing jointly). Employees meeting these limits are “qualifying employees.” There are no documents of verification required of the employee to submit to the employer. The employer may rely on the employee’s statement for verification. However, the Alabama Department of Revenue will disallow any deduction by an employee if the AGI shown on the employee’s Alabama income tax return exceeds the limitations. Click here for your certification form that you may provide to your employees to determine if they qualify.

Deduction for “qualifying employer”
As the qualifying employer you may deduct 200% of the group health insurance costs provided to all “qualifying employees” for tax years beginning after December 31, 2010.

Deduction for “qualifying employee”
The qualifying employee may deduct 100% of the group health insurance premiums paid and is not required to itemize to take the deduction. The deduction is allowed even if the group health insurance premiums were paid with pre-tax dollars through a cafeteria plan. The deduction is taken as an “adjustment to income” on Page 2, Part II of the Alabama Form 40. This “adjustment to income” is in addition to any allowable itemized deduction on the Alabama Form 40, Schedule A.

If you have any questions, please contact our office.