Small businesses that already provide health insurance to their employees may be able to take advantage of the new small business health care tax credit, which can be up to 35% of the employer’s contribution to premiums. This credit is part of the Affordable Care Act (Health Care Reform) and is effective starting in the 2010 tax year.
To be eligible for this tax credit, employers must:
- Pay at least 50% of employees’ premiums
- Have 1-25 FTE employees (could be more than 25 total if some are part time)
- Pay an average FTE wage of less than $50,000 per year
Sole proprietors are not eligible for this tax credit.
Business owners should work with their accountants or tax professionals regarding the small business health care tax credit.
More resources
The IRS Three Simple Steps gives a simple overview.
The Health Care Authority has provided this fact sheet: Small Business Health Care Tax Credit Questions & Answers.
The IRS Small Business Health Care Tax Credit and Frequently Asked Questions web pages provide detailed information and instructions.