Affordable Care Act and Small Business Tax Credit

I have a client who owns a small company and provides health  insurance for his employees.  When I suggested he look into the Small Business Health Care Tax Credit, he said he was not aware of this program that is part of the Affordable Care Act (aka “Obamacare”).

The Small Business Health Care Tax Credit takes effect this year (2010) and is designed to help small businesses and small tax-exempt organizations afford the cost of covering their employees and is specifically targeted for those with low- and moderate-income workers. The credit is designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have. In general, the credit is available to small employers that pay at least half the cost of single coverage for their employees.

To be eligible for the credit, employers must cover at least 50 percent of the cost of health care coverage, have less than the equivalent of 25 full-time employees and pay average annual wages below $50,000. Both taxable and tax-exempt organizations may qualify, but nonprofit organizations that are tax-exempt will be eligible for a credit of only 25 percent of health care costs.

In 2014, the tax credit will increase to 50 percent of health care premium costs for small businesses and 35 percent for tax-exempt organizations.

For more information go to the IRS web page on the Small Business Health Care Tax Credit for Small Employers.

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