Tax Credit Information
The new national health reform law (PPACA) signed into law by the President on March 30, 2010 includes a small business health care tax credit, effective immediately, which is designed to help small employers offer health insurance coverage for the first time or maintain coverage they already have.
The credit is available to small employers that pay at least half of the cost of individual coverage for their employees in 2010. The credit is specifically targeted to help small businesses and tax exempt organizations that primarily employ low and middle income workers.
Eligible Credit Claims
For tax years 2010 to 2013, the maximum credit is 35% of premiums paid by eligible small business employers and 25% of premiums paid by eligible employers that are tax exempt (nonprofit) organizations.
The maximum credit goes to the smallest employers those with ten or fewer full-time equivalent (FTE) employees aying annual average wages of $25,000 or less, but partial credits are available for employers with up to 25 FTEs and with average wages up to $50,000. Since the eligibility rules are based in part on the number of FTEs, not the number of employees, businesses that use part-time help may qualify even if they employ more than 25 individuals.
Eligible small businesses can claim the credit as part of the general business credit starting with the 2010 income tax return they file in 2011. For tax exempt organizations, the IRS will provide further information on how to claim the credit.
The Internal Revenue Service has issued several materials and resources to help employers determine if they are eligible, and if so, how to go about getting the tax credit: