Qualifying Small Businesses to Benefit from Health Care Tax Credit

As details of the newly enacted Patient Protection and Affordable Care Act emerge, one item is becoming clear – a Small Business Health Care Tax Credit to help small businesses afford the cost of providing health insurance for their workers.

Golf course owners and operators are among the small businesses the Congressional Budget Office estimates to save $40 billion by 2019 as a result of the provision.

The tax credit, which is effective immediately, will cover up to 35 percent of the premiums a small for-profit business pays to cover its workers. And up to a 25 percent tax credit for small not-for-profit organizations. In 2014, the rate is expected to increase to 50 percent and 35 percent respectively.
 
The Council of Economic Advisors estimates that 4 million small businesses are eligible for the credit if they provide health care to their workers. In general, qualifying businesses must have less than the equivalent of 25 full-time workers, pay average annual wages below $50,000, and cover at least 50 percent of the cost of health care coverage for their workers.
 
The Internal Revenue Service (IRS) has issued information to make it easier for small businesses to determine whether they are eligible for the new health care tax credit and how large a credit they will receive. This Information, including answers to frequently asked questions, is available on the IRS’s Web site (http://www.irs.gov/), on the Affordable Care Act page.
 
Eligible small for-profit businesses can claim the credit starting with their 2010 income tax return. For not-for-profit organizations, the IRS will provide further information on how to claim the credit.
 
The credit is anticipated to phase out gradually for businesses with average wages between $25,000 and $50,000 and for businesses with the equivalent of between 10 and 25 full-time workers.