Healthcare scope
As tax practitioners prepare for year-end planning consultations, the impending expiration of enhanced Affordable Care Act premium tax credits demands immediate attention. With health insurance marketplace enrollment opening on November 1st, clients need proactive guidance on navigating potential premium increases and exploring alternative tax-advantaged strategies.
The enhanced premium tax credits bolstered by the American Rescue Plan Act and Inflation Reduction Act are scheduled to expire on December 31, 2025, with no current legislative proposals including extensions. According to recent analysis by the Commonwealth Fund, approximately 4.9 million individuals may lose coverage, with state economies projected to contract by $40.7 billion in 2026. The research estimates nearly 339,000 job losses, with a significant impact on the healthcare sector, particularly in Southern states including Texas, Florida, Georgia, and the Carolinas.
For individual clients, Health Savings Accounts present the most compelling planning opportunity. With 2025 contribution limits of $4,300 for individuals and $8,550 for families, plus an additional $1,000 catch-up contribution for those 55 and older, HSAs offer triple tax advantages through deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses. Practitioners should identify clients with high-deductible health plans who are not maximizing contributions and model the tax savings of switching to HDHP plans paired with maximized HSA contributions versus traditional plan costs for those facing premium increases.
Flexible Spending Accounts also warrant review. With the 2025 health FSA limit at $3,300, clients should be reminded of use-it-or-lose-it deadlines, while those anticipating higher out-of-pocket costs in 2026 should consider maximizing elections during fall open enrollment. Additionally, with potential premium increases, more clients may exceed the 7.5% AGI threshold for itemized medical expense deductions, creating opportunities to bunch medical expenses strategically between 2025 and 2026.
For small business clients, this environment creates valuable opportunities to enhance employee retention through strategic benefit offerings. Employer HSA contributions are tax-deductible business expenses not subject to payroll taxes, making them cost-effective alternatives to salary increases. An employer contributing $2,000 to an employee's HSA costs exactly $2,000, whereas the same amount in salary costs approximately $2,153, including payroll taxes, while netting the employee only $1,400 to $1,600 after taxes.
Qualified Small Employer Health Reimbursement Arrangements offer another solution for businesses with fewer than 50 employees, with 2025 limits of $6,350 for individuals and $12,800 for families. These arrangements allow employers to reimburse employees tax-free for individual health insurance premiums and medical expenses without maintaining traditional group coverage. Individual Coverage HRAs provide similar benefits for employers of any size with no contribution limits, allowing defined contribution approaches that provide budget predictability.
Tax practitioners should immediately segment their client base to identify those likely receiving marketplace subsidies, schedule proactive meetings before November 1st enrollment, and prepare educational materials on HSA benefits and HDHP options. For employer clients, initiating 2026 benefits review conversations now positions practices as strategic advisors during this period of healthcare cost uncertainty. The combination of individual tax strategies and employer benefit innovations provides practitioners with valuable planning opportunities that address both immediate year-end needs and longer-term client retention and cost management objectives.
Christine Gervais is a licensed CPA, using her skills to help businesses grow and achieve their fullest potential. Christine has a Master’s degree in accounting from Southern New Hampshire University in addition to holding her CPA license for over a decade. Notably, Christine is a nationally recognized speaker providing education to other CPAs on how to best serve clients as well as instruction on a wide variety of topics for business owners on how to maximize success. Christine prides herself on the value she can bring to clients with her extensive tax knowledge and provides strategic, forward-thinking financial strategies to help clients grow. When not behind her desk, you can find Christine spending quality time with her daughter and stepson or tending to the family’s excessively loved farm animals.
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