Yesterday the IRS issued the first set of rules for small businesses to benefit from a tax credit signed into law as part of the Affordable Care Act.
Detailed guidelines with examples are available (PDF), but to summarize:
the credit is available to small employers that pay at least half the cost of single coverage for their employees in 2010. The credit is specifically targeted to help small businesses and tax-exempt organizations that primarily employ moderate- and lower-income workers.
For tax years 2010 to 2013, the maximum credit is 35 percent of premiums paid by eligible small business employers and 25 percent of premiums paid by eligible employers that are tax-exempt organizations. The maximum credit goes to smaller employers –– those with 10 or fewer full-time equivalent (FTE) employees –– paying annual average wages of $25,000 or less. The credit is completely phased out for employers that have 25 FTEs or more or that pay average wages of $50,000 per year or more. Because the eligibility rules are based in part on the number of FTEs, not the number of employees, businesses that use part-time help may qualify even if they employ more than 25 individuals.
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.
Unfortunately, I think my employer has one-too-many employees to take advantage of this (and we’re trying to hire more), but if your employer qualifies, I recommend you make sure they know about this.
IRS Offers Details on New Small Business Health Care Tax Credit, IRS.gov, May 17, 2010
Updated October 13, 2016 and originally published May 18, 2010.