Tax Credit for Health Care for Small Businesses
The Internal Revenue Service (IRS) issued guidelines to make it easier for small businesses determine whether they are eligible for new tax credit for health care under the Health Care Act of Low Price and how big is the credit they receive. The guidelines make clear that small businesses that receive state tax credits for health care may still qualify for full federal tax credit. Moreover, they allow small businesses get the credit not only for regular health insurance but also for dental and vision coverage to be added.
Notice 2010-44 (in English), IRS.gov, provides detailed guidelines to help small-scale employers to determine if they qualify for the loan and calculate the amount of credit. The notice also requested public comment on issues that should be addressed by future guidelines.
“The health care credit for small businesses is available to small businesses and tax-exempt organizations that pay at least half the cost of coverage for their employees,” said IRS spokeswoman Sara Eguren. “It is designed to encourage employers to moderate-income workers and low to provide health coverage for the first time or keep the coverage they already have,” he added.
For tax years from 2010 to 2013 the maximum credit is 35 percent of the premiums paid by employers of small businesses eligible and 25 of the premiums paid by employers are tax-exempt organizations eligible. The maximum credit goes to the employers on a smaller scale – those with 10 or fewer employees to full-time equivalent (FTE) – paying annual salaries average $ 25,000 or less. The credit is reduced until phased out by employers who have 25 FTEs or more or who pay annual salaries average $ 50,000 or more. As 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 over 25 people.
“About 4.5 million small businesses and tax-exempt organizations are receiving mail from the IRS informing them of the new loan,” said Eguren. “But even those who have not received a postcard could verify if they are eligible in more than a dozen examples from the IRS Web site.”
Small businesses eligible may claim the credit as part of the general business credit starting with the income tax return for 2010 presented in 2011. For tax-exempt organizations, the IRS will provide additional information on how to claim the credit.
More information about the claim, including a step by step guide and answers to frequently asked questions is available at the Health Care Act of Low Price IRS.gov.