Don't Delay! Small Business Tax Credits for Health Care

Wondering how health care reform effects your small business? Read on! The Small Business Tax Credits are offered to businesses that provide health insurance for their employees. The credits make health insurance more affordable and provide an incentive for small businesses to offer employer-provided insurance. Read our full paper on small business tax credits here.

What Tax Credits are Available for my Small Business?
The initial tax credits are available for tax years 2010 through 2013 and a second tax credit begins in 2014 when the health insurance exchanges begin. See table below.

Eligibility:
Fewer than 25 full-time equivalent employees
Average annual wages less than $50,000
Purchase health insurance for employees
Must contribute at least 50% of the cost of premium

Sole Proprietors:
Self employed sole proprietors who are not employers and their immediate family members do not qualify for the small business tax credit benefits described below. However, sole proprietorships are able to receive small business tax credits for providing their non-family employees with health insurance if they meet the other eligibility requirements for the small business tax credit credit. Read on for more information on how sole proprietors benefit from reform.

2010-2013 Tax Credit Amount 2014 and Beyond Credit Amount
Equal up to 35% of premium contributions Same eligibility (see above)
Full credit to businesses with 10 or fewer full-time equivalent employees and average annual wages of less than $25,000 Purchase insurance through state exchange
Credit lower as number of employees and average wages increase Credit equal up to 50% of premium contribution
Not for profit organizations meeting requirement
Not for profit organizations meeting requirement
eligible for credit up to 25% of premium contribution
Not for profit organizations eligible for credit up to 35% of premium contribution

  

For more information on the Small Business Tax Credits visit the Internal Revenue Service’s Tax Credit  pages.  Also see this article on applying for small business tax credits.

Sole Proprietors and their family member employees are eligible for:
Premium Subsidies and Cost Sharing Credits (Starting in 2014)
– Subsidies and credits to lower premiums and cost-sharing requirements are available to individuals and families with incomes below 400 percent of the federal poverty line (below $88,000 a year for a family of four) who purchase coverage in the newly established exchanges.

The amount of the premium subsidies and credits are figured on a sliding scale, with those who make less getting a bigger credit and those who make more getting a smaller one. The subsidies and credits ensure that people do not have to pay more than a certain percentage of their income to purchase a comprehensive health insurance package. For example, a family of four with an income of two times the poverty line, or about $44,000, would pay no more than 6.3 percent of its income, or about $232 a month, for a family policy.

Use this handy tax credit calculator to calculate the tax credit amount your small business is eligible for. 

Entry into High Risk Insurance Pools (Starting in 2010) - Health insurance pools that provide health insurance to those who have been denied coverage due to a pre-existing condition.  These provide a bridge for coverage until 2014 when insurers will no longer be able to deny coverage to individuals based pre-existing conditions or current health status.  Click here to learn more about high risk insurance pools

Buying Coverage in the Health Insurance Exchange (starting in 2014)
– The Exchange will allow individuals and small businesses to pool together into a larger group. Three tiers of insurance plans that meet minimum benefit levels and include consumer protections will be available.

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Questions?  Contact Virginia Wolking at virginiaw@cfra.org or (402) 687-2103 ext. 1017