More On The Small Business Health Care Tax Credit

On May 17, the IRS published new information to make it easier for small businesses to figure out if they are eligible for the new health care tax credit and to calculate how big their credit might be. The IRS also makes it clear that businesses may still qualify for the federal credit even if they are receiving state health care tax credits.  The other good news is the credit also applies to add-on vision and dental coverage.

The Small Business Tax credit is in effect for this year, and it is supposed to encourage small businesses to either begin offering medical insurance for their employees or to maintain the coverage that they have in place.
According to the IRS  

In general, the credit is available to small employers that pay at least half the cost of single coverage for their employees in 2010.The credit is specifically targeted to help small businesses and tax-exempt organizations that primarily employ moderate- and lower-income workers.
For tax years 2010 to 2013, the maximum credit is 35 percent of premiums paid by eligible small business employers and 25 percent of premiums paid by eligible employers that are tax-exempt organizations. The maximum credit goes to smaller employers –– those with 10 or fewer full-time equivalent (FTE) employees –– paying annual average wages of $25,000 or less. The credit is completely phased out for employers that have 25 FTEs or more or that pay average wages of $50,000 per year or more. Because 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.  Notice 2010-44 .

Freya Shoffner and the attorneys at Shoffner & Associates has been helping small businesses negotiate the ins-and-outs of tax credits for a long time, and we'll be happy to help you too.  Give us a call.  617-369-0111.



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