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Health Care Update: Small Business Tax Credit

Health Care Update: Small Business Tax Credit

Friday, April 8, 2011

 

Health Care Update:
Small Business Tax Credit
Providing health care coverage gets cheaper for employers

The Small Business Health Care Tax Credit helps small businesses and small tax-exempt organizations afford the cost of covering their employees.

One of the benefits of health care reform is the possibility for owners of small businesses, many of whom are immigrants, to apply for tax credits. The credit is designed to encourage small employers to offer health insurance coverage for the first time or maintain the coverage they already have. In general, the credit is available to small employers that pay at least 50% of the cost of health insurance coverage for their employees. Other requirements to qualify include: the employer has less than the equivalent of 25 full-time workers (or fewer than 50 half-time workers) and an average annual wage of a worker must be below $50,000, making this credit most beneficial for low and moderate income workers.

In order to claim the credit, small employers, whether businesses or tax-exempt organizations, will use new IRS 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. Tax-exempt organizations will include the amount of the credit on Line 44f of the revised IRS Form 990-T, Exempt Organization Business Income Tax Return. Form 990-T has been revised for the 2011 filling season to enable eligible tax-exempt organization to claim the tax credit (even those that owe no tax on unrelated business income).

Want to see if you qualify for the Small Business Health Care Tax Credit? Follow the three simple steps on the IRS fact sheet here.

To see examples of how the tax credit applies to different business scenarios, click here.

For more information or to apply please visit http://www.irs.gov/businesses/index.html

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