Health Care Credit for Small Businesses and Non-Profits

The IRS is sending out postcard notifications on the recently enacted Patient Protection and Affordable Care Act that could earn you a new tax credit this year for providing health insurance for your employees starting in 2010.

These are some key health care credit eligibility standards:

• The credit is available to companies with fewer than 25 employees with average wages of $50,000 or less.
• An employer with fewer than 50 half-time employees can qualify.
• Your Company must provide health coverage for employees and pay 50 percent of each premium.
• A qualifying employer must pay average annual wages below $50,000 to get even a partial credit.
• Both taxable (for-profit) and tax-exempt (non-profit) firms qualify.
• The credit is not available to self-employed individuals.
• Businesses with average payrolls over $50,000 will not qualify for the credit at all.

The full credit goes to companies with 10 or fewer employees and average annual wages of $25,000 or less.

The credit is worth up to 35 percent of your premium costs in 2010 (25 percent for non-profits). In 2014 that jumps to 50 percent (35 percent for non-profits). A ruling just issued by the IRS also confirms that the credit applies to premiums you pay for dental and vision coverage. And your business can still qualify for the federal credit even if you receive a separate state credit.

A company can use the credit to reduce income tax owed and can carry the credit forward 20 years or back one year after 2010. Non-profits can use the credit against withholding and Medicare taxes owed on behalf of their employees.

To help with calculating the credits your business could qualify for please contact your RINA representative.