Health Insurance Small Business Tax Credit

By tfbuser on December 16, 2010 | Listed under Heathcare Reform | Leave a comment |

The Small Business Tax Credit from the Health Care Reform Bill was signed into law on 3/23/2010.

So how does the small employer health care tax credit work?  As with most tax issues there is no short answer.  In this post  I will provide information and resources to help you and your tax professional navigate this new provision in the US Tax Code.

PLEASE NOTE: This blog post should not be taken as legal or tax advice.

This Tax Credit is aimed at small businesses with fewer than 25 employees. Also there are restrictions on the average wage paid to employees. If compensation is too high, the credit phases out.

This credit is rolled out into two stages:

  • Part I:  Tax years 2010 – 2013
  • Part II: Tax years 2014 and later

During stage I, the tax credit is worth up to 35{e64afe744808f925ae4e621067af93b57aa961a0f89d5b9e5dafb1c9b1c107d5} of a company’s health insurance costs (25{e64afe744808f925ae4e621067af93b57aa961a0f89d5b9e5dafb1c9b1c107d5} for non-profits).

During stage II, the tax credit is worth up to 50{e64afe744808f925ae4e621067af93b57aa961a0f89d5b9e5dafb1c9b1c107d5} of a company’s health insurance costs (35{e64afe744808f925ae4e621067af93b57aa961a0f89d5b9e5dafb1c9b1c107d5} for non-profits).

The Internal Revenue Service has a large website with excellent resources.  I have searched this site and will provide the government resources such as I was able to find them:

Small Business Health Care Tax Credit for Small Employers

This Three Simple Steps Fact Sheet lays out how the government is contacting employers and includes the first good tool for employers to use.

Work through this short work sheet to give you a quick answer as to how this new law will affect you and your business.  I also have a link to the Tax form 8941 that is to be used for 2010 Tax year.

Here is a link that gives 3 different scenarios for using this new tax credit.

Here is a FAQ page that will address other concerns you or your tax professional may have.

For a detailed description of the types of coverage that are counted for the credit, see section II.G of Notice 2010-44.

The following is a video from the Internal Revenue Service on this new tax credit:

Added YouTube Video Link from the IRS on Tax Credit

The following are additional health insurance related tax resources I have gathered that may be of help:

Fact Sheets 2010

Affordable Care Act Tax Provisions

Affordable Care Act of 2010: News Releases, Multimedia and Legal Guidance


Small Business and Self-Employed Tax Center

Credit for Small Employer Health Insurance Premiums (Form 8941)

Affordable Health Care for America Act (Wikipedia)

The 2010 Federal Income Tax Guide (Publication 17 Catalog No. 10311G)

Again, this information should not be taken as tax or legal advice. I have used this blog article to give small business people in Texas a place to access the information on this new tax credit law.  Please consult your tax professional (CPA) and/or attorney.

I hope the above information is useful and timely, and even if you are not a client of Casey Lowery and Sugar Creek Financial Group and would like to discuss any group or individual Insurance matters,  please feel free to email us or call (713) 481-6501.

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