What the Affordable Care Act Means to
You and Your Nanny in 2014 & Beyond
By Stephanie Breedlove, Breedlove & Associates ▪ Aug 2013
OBAMACARE
The Patient Protection and Affordable Care
month ($3,000 per year). But that would
Act (PPACA) has made many changes to the
reduce her disposable income to $23,000
health insurance system. One of the primary
and she doesn’t feel like she cannot afford it.
goals is to help millions of Americans obtain
coverage. Starting October 1, you will have
So Pam discusses health insurance with her
access to your state’s online health
family. Since she’ll have to be covered next
insurance exchange, which will provide a
year and she’s up for a raise anyway, the
marketplace where you can compare plans
family opts to pay for Pamela’s health
to find a policy that suits your individual
insurance premiums. Neither Pamela nor the
needs. Beginning January 1, 2014, you will
family has any additional taxes on the
need to have health insurance or face a fine.
$3,000 the family contributes. Plus, the
family will get about $1,000 back through
This may sound like a lot to deal with if you
the Health Insurance Tax Credit. Now, the
don’t currently have health insurance or are
$3,000 health insurance plan has an after-
unhappy with the coverage you have, but if
tax cost of $2,000. And next year, the
the family you work for is willing to help you
savings will be even higher when the family’s
out, it can benefit both parties. The reason is
tax credit percentage increases.
because health insurance contributions
aren’t considered taxable compensation to
By contrast, if the family had bumped Pam’s
you or the family so neither party has any
compensation by $3,000 so she could afford
taxes on that portion of the compensation.
insurance, the plan would actually cost Pam
Additionally, the IRS provides a special tax
an additional $500 in taxes and the family
credit for employers that contribute to their
would pay an additional $300 in employer
nanny’s health insurance.
taxes. Structured this way, the health
insurance premiums would have an after-tax
In order for the family to qualify for the tax
cost of $3,800 per year ($3,000 + $500 in
credit, you cannot earn more than $50,000
employee taxes + $300 in employer taxes).
per year and the family has to pay for at
least half of your health insurance
As you can see, simply understanding this
premiums. If both of those criteria are met,
small tax incentive saves the family $1,800
the family can take a tax credit of up to 35%
and helps Pam obtain a great health
on each dollar they contribute - and in 2014,
insurance policy.
the tax credit will increase to 50%.
Even if you end up meeting your family
Here is an example to illustrate the benefits
halfway on health insurance, it’s still
for both you and the family:
beneficial to both parties as long as you
structure payroll correctly. If you or your
Pam is currently paid $30,000 in taxable
family has any questions, just give us a call
wages. After taxes, her “take-home” pay is
or visit our state-specific nanny tax pages.
about $26,000. She is considering a health
We’re here to help!
insurance policy with premiums of $250 per
©2013 Breedlove & Associates