Small Business Health Care Tax Credit - 2010

In recent years, small businesses have had a hard time finding affordable health insurance plans for themselves and their employees – it has been especially difficult during recession.  With limited resources, small workforces, and lower profits in many cases, many employers have found it hard to pay for high premiums.  In 2010, millions of business owners in America received a post card from the IRS notifying them that help was on the way, thanks to the IRS Small Business Health Care Tax Credit.   The post card encouraged business owners to check their eligibility.  The tax credit was created as a part of the recent health care overhaul.
The new tax credit is being offered not only to encourage employers to obtain health insurance, but also to keep existing plans.  The plan will be available through 2013 and additional assistance may begin in 2014.

Currently, employers who qualify for the credit can claim up to 35 percent of premiums paid.  In 2014, the amount is set to increase to 50 percent. This means huge savings for those who already have plans, and has made health care options much more affordable for all other qualified employers.  Employers can claim the benefit even if they receive state credits for health insurance premiums.

Who Qualifies?
For an employer to be eligible for the small business health care tax credit, they must have less than 25 full-time employees with average wages less than $50,000 per year each.  Companies with more employees may qualify if wages are lower, or if hours are not full-time.  Tax exempt organizations are also qualified employers (at a slightly lower rate) as long as they meet the IRS Code section 501(c) organization description.  Household employers and small employers outside of the U.S. may also be qualified to claim the credit.
The White House estimated that up to 4 million small businesses may qualify for the tax credit.

Which Expenses are Counted?
Besides medical care alone, the health care tax credit also applies to dental and vision premiums.  Employers must be sure to read the “fine print”.  According to IRS.gov, “Only premiums paid by the employer under an arrangement meeting certain requirements (a “qualifying arrangement”) are counted in calculating the credit.”  Under a “qualifying arrangement”, the employer must pay at least 50 percent of their workers’ premiums.
More information about the Small Business Health Care Tax Credit for small employers can be found at IRS.gov.