The information below provided by the IRS summarizes the Small Business Health Care Tax Credits and the eligibility requirements. Please take a moment to review the content and see if your business qualifies. Feel free to also contact us with any questions.
Small Business Health Care Tax Credit:
IRS Offers Guidance on Tax Credits in Health Reform Law
Health coverage legislation enacted this year includes a Small Business Health Care Tax Credit to help small businesses and small tax-exempt organizations afford the cost of covering their workers.
Providing health care coverage. A qualifying employer must cover at least 50 percent of the cost of health care coverage for some of its workers based on the single rate.
Firm size. A qualifying employer must have less than the equivalent of 25 full-time workers (for example, an employer with fewer than 50 half-time workers may be eligible).
Average annual wage. A qualifying employer must pay average annual wages below $50,000.
Both taxable (for profit) and tax-exempt firms qualify.
Amount of Credit
Maximum Amount. The credit is worth up to 35 percent of a small business’ premium costs in 2010. On Jan. 1, 2014, this rate increases to 50 percent (35 percent for tax-exempt employers).
Phase-out. The credit phases out gradually for firms with average wages between $25,000 and $50,000 and for firms with the equivalent of between 10 and 25 full-time workers.
Three Simple Steps for Employers to Qualify
To determine if your small business or tax exempt organization qualifies for the Small Business Health Care Tax Credit, follow the three simple steps on the IRS fact sheet.
Scenarios illustrate how the credit applies to employers in different circumstances.
Questions and Answers
Need more detailed information? Visit the IRS FAQ page.
For More Information
News release IR-2010-38, New for 2010: Tax Credit Helps Small Employers Provide Health Insurance Coverage, gives a description of the credit and when and how to claim it.