Small Business Tax Credit
1. What is the small business tax credit?
The small business tax credit is a provision of the Affordable Care Act, entitling certain small businesses to a tax credit for providing health insurance to their employees, beginning with the 2010 tax year.
2. What is the purpose of the small business tax credit?
The credit's purpose is to help small businesses afford the cost of covering health insurance for their workers.
3. When does the small business tax credit go into effect?
Qualified employers may count all premiums paid for a tax year beginning in 2010, even for premiums paid before the law was enacted.
4. Which employers are eligible for the small business tax credit?
Small businesses and small tax-exempt organizations (as defined under Internal Revenue Code Section 501[c]) may be eligible. Qualified small business employers are generally those with fewer than 25 full-time equivalent employees for the tax year (more if you have part-time employees). These employees' wages must average less than $50,000 per full-time employee for the year, and the employer must pay at least 50 percent of the health insurance premium for single coverage.
5. Are both for-profit and not-for-profit employers eligible for the small business tax credit?
Yes, but the rules for calculating the tax credit differ for each. To learn more about calculating the tax credit, consult your tax professional or go to the IRS website for new benefits for small employers who provide employee health insurance.
6. Are premiums paid by employees eligible for the small business tax credit?
No, only premiums paid by employers are eligible for the tax credit.
7. How much is the small business tax credit?
Eligible small business employers could qualify for a credit worth up to 35 percent of premiums paid (25 percent of premiums paid for tax-exempt groups).
8. How does an employer claim the small business tax credit?
The credit is claimed on the business' annual tax return. For tax-exempt businesses, the IRS will provide further information on how to claim the credit.
9. Could claiming the small business tax credit affect a business' tax deductions for health insurance as a business expense?
Yes, it might. The small business health care tax credit is a complex provision with details determined by the IRS. We suggest you contact your tax professional and monitor the IRS website for more information.
10. Will the small business health care tax credit provision be administered by EmblemHealth?
No. It is administered by the IRS.
11. Where can I find more information about the small business tax credit?
Visit the IRS website for more information on the small business tax credit, including:
- Eligibility rules
- Amount of credit
- Three simple steps for employers to qualify
- Questions and answers
- A video explaining the who, what, why and how of the small business tax credit