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April 24, 2013 at 10:59 AM
If you’re a small business, would you qualify for the tax credit available under the Patient Protection and Affordable Care Act?
You bet you would.
Here’s a small business health care tax credit Q&A from the IRS, with a little extra tossed in by the editors at BenefitsPro.com, that should help:
Q. Who is eligible?
A. Assuming you contribute 50 percent or more toward employees’ self-only health insurance premiums, a qualified employer must:
- have fewer than 25 full-time employees or a combination of full-time and part-time (for example, two half-time employees equal one employee for purposes of the credit);
- the average annual wages of employees must be less than $50,000,
- and the employer must pay at least half of the insurance premiums.
The employer must also pay premiums under a “qualifying arrangement.” See the “What expenses count” question on the Calculating the Credit page.
Q. How much are we talking about?
A. Up to 35 percent (25 percent is the limit for non-profits) of premium contributions. By 2014, the credit rises to 50 percent or 35 percent for nonprofits.
Q. What’s this I hear about sliding scales?
A. OK, you’ll want to break out your calculators for this. Ready? The credit is reduced if your number of FTEs exceeds 10, or if average annual wages exceed $25,000. Under the government’s formulas, the credit is reduced by 1/15 for each FTE above 10. For each $1,000 above $25,000 in average annual wages, the credit is reduced by 1/25.
Q. Can a household employer qualify, even if he or she is not directly engaged in a trade or business?
A. Yes. For tax years 2010 through 2013, a household employer can qualify.
