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The Affordable Care Act requires employers with 50 or more full-time equivalent employees to provide health coverage to at least 95% of full-time employees and sets a minimum baseline of coverage and affordability. Employers who do not comply face annual penalties if any of their employees end up qualifying for premium tax credits (subsidies) in the Marketplace.
There are two types of penalties under the employer mandate. One is for large employers that don’t offer coverage at all, and the other is for large employers that offer coverage that doesn’t provide minimum value and/or isn’t considered affordable.
In both cases, the penalty is only triggered if at least one full-time (30+ hours per week) employee receives a premium tax credit in the marketplace.
The penalty for offering inadequate or unaffordable coverage can never be greater than the penalty for not offering coverage at all.
As of 2023, the employer mandate penalties are as follows:
These amounts started at $2,000 and $3,000, respectively in 2015. But they are indexed each year by the IRS, and have thus grown over time (see FAQ 55 in this link for details).
It's important for the self-employed to know all the ways they can save a few dollars here and there. One obvious place to look is on their tax forms, but one look isn't enough.
Suspect that your employer’s health benefits are subpar? ACA marketplace subsidies could provide relief.
For the self-employed, premiums affect modified adjusted gross income, which in turn affects premiums. But the IRS has a method for addressing this circular situation.
If you’re self-employed, you can generally deduct the full amount you pay in premiums without having to itemize your deduction.