Are You Eligible for the Small Business Health Inusrance Tax Credit?

Somebody asked me the other day if the new law (well, it's not that new anymore...2010) will require small businesses to provide insurance. No, it won't.  But what a business owner needs to know is that the 'new law' will provide such businesses with tax credits if they choose to provide insurance to their employees.  

The tax credit is designed to both support those small businesses that provide coverage today as well as those that newly offer such coverage.  

That's big.

Effective January 1, 2010, tax credits became available to qualifying small businesses that offer health insurance to their employees. So if your business qualifies for a tax credit, you are eligible right now. 

About 4 million small businesses will be eligible to receive tax credits if they provide insurance.

The tax credit is worth up to 35 percent of the premiums your business pays to cover its workers – 25 percent for nonprofit firms.  In 2014, the value of the credit will increase to 50 percent – 35 percent for nonprofits.

Your business qualifies for the credit if you cover at least 50 percent of the cost of health care coverage for your workers, pay average annual wages below $50,000, and have less than the equivalent of 25 full-time workers (for example, a firm with fewer than 50 half-time workers would be eligible). 

The size of the credit depends on your average wages and the number of employees you have.  The full credit is available to firms with average wages below $25,000 and less than 10 full-time equivalent workers.  

It 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. To learn more about the small business tax credit, you can also visit IRS.gov