New for 2010: Tax Credit for Small Groups
The IRS recently released materials for those wishing to claim the small business health care tax credit for 2010. A provision of the Patient Protection and Affordable Care Act (PPACA), this tax credit is designed to encourage small groups to offer health care coverage for the first time or enable them to maintain the coverage they already have. It will likely provide assistance to about four million small businesses.
This tax credit can be significant for a qualifying small group. In 2010, the maximum credit is 35% of employer-paid premiums; for tax-exempt organizations, the maximum is 25% of employer-paid premiums. In 2014, the maximum increases to 50% of employer-paid premiums; for tax-exempt organizations, it increases to 35% of employer-paid premiums. In order to qualify for the credit, the employer must not employ more than 25 employees and the average annual compensation of those employees must not exceed $40,000.
Here’s a look at how a company with 10 employees could benefit:
- Employees: 10
- Wages: $250,000 or $25,000 per worker
- Employer Health Care Costs: $70,000
2010 tax credit: $24,500 (35% credit)
2014 tax credit: $35,000 (50% credit)
For more examples, click here.
While there is no formal guidance yet, the IRS has provided educational resources for small businesses wishing to claim the credit this year. Click here to see the following information:
- Eligibility rules
- Amount of credit
- Three simple steps to determine a small group’s eligibility
- More tax credit scenarios
- FAQs
You can expect more health care reform updates like this one throughout the year. We’re eager to get information out to you as soon as possible, so we can help our clients get the most from the new legislation. As always, we greatly appreciate your business and want to keep our customers informed.
