The new small business health care tax credit is designed to encourage small employers to offer and pay for health insurance for the first time, or maintain coverage they already have.
In general, the credit is available to small employers that pay at least half the cost of single coverage for their employees in 2010 through 2013 (The credit expires in 2014). The credit is specifically targeted to help small businesses and tax-exempt organizations that primarily employ moderate- and lower-income workers.
So, the question is, how much will this save you? If your business is eligible, the credit is simply the health insurance premiums paid times the applicable percentage, which is 35% for eligible small business employers and 25% for eligible tax-exempt organizations. So, for a taxable eligible small business paying $40,000 in health insurance premiums, the credit for 2010 would be $14,000 (35% × $40,000).
An eligible small employer is an employer with no more than 25 full-time equivalent employees (FTEs) employed during its tax year, and whose employees have annual full-time equivalent wages that average no more than $50,000. The credit percentage is reduced if the business has more than 10 FTEs but not more than 25 FTEs and if average wages per employee is between $25,000 and $50,000. Also, the premiums paid cannot exceed the average premium for the small group market in the employer’s State.
Employees do not include a sole proprietor, a partner in a partnership, a shareholder owning more than 2% of an S corporation, any owner of more than 5% of other businesses, a family member of any of these individuals, or a member of such a business owner’s or partner’s household. Any wages paid to these individuals are not included in determining the average annual wages. Likewise, any premiums paid on their behalf are not counted in determining the amount of the credit.
The credit can be carried back for one year and carried forward for 20 years, and can offset alternative minimum tax.
Please contact us if you have questions about whether your business may qualify and we will be happy to look at your specific situation to determine the potential credit you would receive.
About Blackman & Sloop CPAs, P.A.:
Blackman & Sloop is a full-service CPA firm headquartered in Chapel Hill, North Carolina and is actively involved in auditing, taxation, management consulting, financial planning, and related services. The firm directs a large part of its services toward providing management with advice on budgeting, forecasts, projections, financing decisions, financial analysis, and tax developments. The firm also performs review and compilation services and prepares not-for-profit, corporate, individual, estate, retirement plan, and trust tax returns as well as technology consulting services regarding installation and training on QuickBooks. Blackman & Sloop provides services in Raleigh, Durham, Chapel Hill, RTP, Hillsborough, Pittsboro, Charlotte, and the rest of North Carolina. To find out more please visit http://www.blackmansloop.com
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