MAY 2010 - The Patient Protection and Affordable Care Act
Michelle Bennett, CPA
What small businesses and tax-exempt organizations need to know!
If your small business or tax-exempt organization pays employee health insurance premiums in 2010, you may be eligible to claim a new credit on your 2010 tax return.
ELIGIBILITY RULES
- Providing health care coverage. A qualifying employer must cover at least 50 percent of the cost of health care coverage for some of its workers based on the single rate.
- Firm Size. A qualifying employer must have less than the equivalent of 25 full-time workers (for example, an employer with fewer than 50 half-time workers may be eligible).
- Average annual wage. A qualifying employer must pay average annual wages below $50, 000.
- Both taxable (for profit) and tax-exempt firms qualify.
AMOUNT OF CREDIT
- Maximum Amount. The credit is worth up to 35 percent of a small business' premium costs in 2010. On Jan. 1, 2014, this rate increases to 50 percent (35 percent for tax-exempt employers).
- Phase-Out. The credit phases out gradually for firms with average wages between $25, 000 and $50, 000 and for firms with the equivalent of between 10 and 25 full-time workers.
Eligible small businesses can claim the credit as part of the general business credit starting with the 2010 income tax return they file in 2011. For tax-exempt employers, the IRS will provide further information on how to claim the credit.