Credit for Small Employer Health Insurance Premiums
If you are a small employer (including many tax-exempts) that provides health insurance coverage to your employees, you may qualify for the Small Business Health Care Tax Credit.
In March, 2010 Congress passed the Patient Protection and Affordable Care Act. As part of this legislation a new tax credit was created for health insurance premiums paid by a small business employer on behalf of its employees. This was designed to encourage small employers to offer health care coverage.
The credit is refundable and is substantial – 35% for a small business (25% for tax-exempt employers) in 2010, with a scheduled increase to 50% for 2014.
To qualify for the credit you must meet certain criteria:
- Employer must have less than 25 full-time equivalent employees.
- Average salary of the full-time equivalent employees must be less than $50,000 per year.
- Employer must pay at least 50% of the single rate health care premiums under a “qualifying arrangement”.
Example – For the 2010 tax year, a qualified taxable employer has 9 FTEs with average annual wages of $25,000 per FTE. The employer pays $50,000 in health care premiums for those employees. The credit for 2010 is $15,750 (35% x $45,000).
To claim the credit you will complete Form 8941 “Credit for Small Employer Health Insurance Premiums”.
If you think this may apply to your business we encourage you to call one of our professionals and we will assist you in completing the calculations necessary.
Anstiss & Co. is a Lowell- based public accounting firm founded by Ray Anstiss, Sr. in 1964, and is currently listed as a Top-50 Accounting Firm in Massachusetts by the Boston Business Journal, and serves clients throughout the United States.
