2. What is the Small Business Health Care Tax Credit?
Created in 2010 by the federal government to:
• Support small businesses that already offer health insurance
• Entice more companies to offer health insurance
For tax years 2010 through 2013, the maximum credit is:
• 35 percent of eligible contributions for small business employers
• 25 percent of eligible contributions for small tax-exempt employers
In 2014, the credit will increase to a maximum of:
• 50 percent for small business employers
• 35 percent for small tax-exempt employers
3. Is My Business Eligible?
• Do I have fewer than 25 full-time equivalent (FTE) employees?
• Is the average wage of my employees less than$50,000 per year?
• Do I pay at least 50% of my employee’s health insurance premiums?
If you can answer yes to these three questions, you’re well on your way.
4. Estimating the Credit’s Value
As number of employees and/or
average wage rises, the value of the
credit is reduced. For example:
•10 FTEs at average wage of $25K
equals a credit of 35%
•10 FTEs at average wage of $45K
equals a credit of 7%
•20 FTEs at average wage of $25K
equals a credit of 12%
•20 FTEs at average wage of $35K is
phased out, so the credit equals 0%
5. How Do I Claim the Credit?
For small business owners that have a CPA, please consult with your tax
Professional. For small business owners that file your own taxes, you will need
to complete Form 8941. This form, and a complete set of instructions, can be
found by visiting www.irs.gov and searching “Small Business Health Care Tax
Credit.”
To learn more about the credit and to see examples of how it’s being used in
North Carolina, visit www.nchealthcarecredit.org
Editor's Notes
TWO NOTES BELOW**Presenter Note: a simple way to calculate the number of FTEs is to take the total number of hours worked by all employees and divide that number by 2080. Presenter Note: wages paid to business owners and family members are not included in calculating the average wage. Likewise, healthcare costs paid on behalf of business owners and family members are not used in the calculation of eligible healthcare expenses.
Presenter Note: To determine the approximate percentage value of the credit, have the employer find the number of employees in the far left column and then reference that against the average wage paid across the top.
Presenter Note: The information contained within this presentation is our best interpretation of the tax credit. It is always best to consult a CPA when dealing with tax issues.
