Expansion of health insurance premiums paid deduction clears House, dies in the Senate

Expansion of Alabama’s income tax deduction for health insurance premiums paid gained House approval in late April, but the Senate Finance and Taxation Committee never considered it. The legislation’s goal was to encourage more small businesses to provide health insurance for their employees.

The Alabama House approved HB273 by Rep. Jamie Kiel, R-Russellville on April 27. The author of a similar Senate bill withdrew it from committee consideration the same week.

The expanded deduction under Kiel’s bill would have ended Dec. 31, 2028, or whenever total deductions claimed topped $10 million annually.

The deduction would have applied to those who report $75,000 or less in adjusted gross income on their Alabama individual income tax return ($150,000 if married filing jointly) for the applicable year and work for qualifying employers with fewer than 50 employees.

Currently, a qualifying employee is one who makes $50,000 or less and works for a qualifying employer with fewer than 25 employees.

The legislation would have allowed both qualifying employees and employers to deduct 100% of the amounts they pay as health insurance premiums in connection with an employer-provided health insurance plan.

Sen. Arthur Orr, R-Decatur, introduced similar legislation, SB102, which specified that the tax credits could not exceed $5 million annually and would only be effective for four years (2024-2028).  Orr, who chairs the education budget committee, withdrew his bill from consideration after introduction of a bill to phase out a portion of the state’s sales tax on food.

The states’ current income deduction for health insurance premiums paid was enacted in 2011.


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