Are you a small business owner that pays your employees health insurance premiums? If so, you need to make sure that you are taking advantage of The Small Business Healthcare Tax Credit. The credit is for employers paying health insurance premiums on employees in tax years 2010 – 2014. The maximum credit amount for a small business 2010 – 2013 is up to 35% of the premiums. The rate goes up for 2014 to a maximum of 50%. The credit can help make the net effect of the employers health insurance premiums be lower.
To be eligble for the credit a small business owner needs to meet the following criteria:
- Have less than 25 full-time equivalent employees (FTE).
- Pay at least 50% of the employees single coverage healthcare premiums.
- Pay an average salary of less than $50,000 a year.
Once you meet all three of the above criteria, the credit is then calculated using Form 8941. When working through the worksheet that is on the Form 8941 it will ask you to figure the full-time equivalent employees mentioned above. For example, let’s say there is a company that has three 40 hr workers and two part-time 20 hr workers (160 hours). A full-time equivalent employee is someone who works 40 hrs/week, so all of the hours are added up and then divided by 40. When calculating this companies full-time equivalent employees their number will be 4 (160/40=4). This is helpful to know so that an employer just doesn’t look and see that they have more than 25 employees and assume they are not eligble based on that particular criteria. As seen from this example, they could have more than 25 employees but have a full-time equivalent employee number that is less than 25.
The credit is very helpful and can save an employer a lot of money given they meet the criteria for claiming this credit. Forgot to claim the credit for 2010? Don’t worry it’s not too late an amended return can be done to account for this credit. Make sure you are taking advantage of this tax credit. Need help calculating this credit or filing for this credit please contact us and we will be more than happy to help you.