If you are a small business owner that provides health insurance coverage to your employees and you pay at least half of the insurance premiums at the single (employee-only) coverage rate, then you may be eligible to claim the Small Business Health Care Tax Credit.
- Providing health care coverage. A qualifying employer must cover at least 50 percent of the cost of health care coverage for some of its workers based on the single rate.
- Firm size. A qualifying employer must have less than the equivalent of 25 full-time workers (for example, an employer with fewer than 50 half-time workers may be eligible).
- Average annual wage. A qualifying employer must pay average annual wages below $50,000.
- Both taxable (for profit) and tax-exempt firms qualify.
Amount of Credit
- Maximum Amount. The credit is worth up to 35 percent of a small business' premium costs in 2010 (25% for tax-exempt employers). On Jan. 1, 2014, this rate increases to 50 percent (35 percent for tax-exempt employers).
- Phase-out. The credit phases out gradually for firms with average wages between $25,000 and $50,000 and for firms with the equivalent of between 10 and 25 full-time workers.
Claiming the Credit
Small employers will use new Form 8941, Credit for Small Employer Health Insurance Premiums, to calculate the small business health care tax credit. Small businesses will include the amount of the credit as part of the general business credit on their income tax returns.