The new healthcare law provides a tax credit for certain small businesses (including tax-exempt organizations) employing moderate- and lower-income workers. This credit is in effect right now. For years 2010 through 2013, a qualifying business can recover up to 35% of the amount it pays in health insurance premiums for its employees. The IRS has issued guidance on how this part of the new law works.
The maximum credit goes to businesses employing 10 or fewer full-time workers and paying average annual wages of $25,000 or less. (Business owners and their family members are not taken into account.) The credit is reduced as the number of employees rises above 10 or average wages rise above $25,000, and completely phased out if the business has 25 or more employees, or if average wages are $50,000 or more. To qualify, a business must pay at least half the cost of single coverage for their employees and meet a uniformity requirement, which is relaxed under a transition rule for 2010.
The new guidance makes it clear that small businesses receiving state healthcare tax credits may still qualify for the full federal credit. The guidance also clarifies that the credit applies to add-on dental and vision coverage as well as regular health insurance.
Want all the details? Click here for IRS Notice 2010-44 (PDF, 20 pages).
Tags: health insurance
