Facts About the Small Business Health Care Tax Credit

The Small Business Health Care Tax Credit is established to encourage small businesses and tax-exempt organizations to provide the necessary health care benefit to their employees. This tax credit was introduced in 2010 under the Affordable Care Act. Qualifying businesses and charities can claim this credit, thereby lowering their tax bill dollar for dollar. This credit is available to both first-time health care employers and employers who have provided health care to their employees in the past. Here are the requirements to qualify for the tax credit:

Size of the company

To qualify for the Small Business Health Care Credit, a tax-exempt business or organization must have a maximum of 25 full-time or equivalent employees. These employees need to earn, on average, no more than $50,000. An organization whose size is greater than this threshold does not qualify for the credit. The IRS determines whether or not an employee is full-time according to the definition provided by the Department of Labor. According to the Department of Labor, a full-time employee is an employee who works at least 30 hours per week for the same employer.

credit to claim

For tax years 2010 through 2013, qualifying businesses can claim up to 35% of the health care premiums paid by their employees, while tax-exempt organizations can claim up to 25% of the health care expenses of their employees. employees. However, beginning in 2014, the credit increases to 50% of premiums paid by qualifying businesses and 35% by qualifying tax-exempt organizations.

Non-refundable Credit

The Small Business Health Care Credit is a non-refundable tax credit. Therefore, organizations and businesses that qualify to claim the credit can only use the credit against taxes owed. These qualified organizations cannot obtain a refund check against credit. However, if an eligible small business does not use all of its credit in the claim year, it can carry over the credit from 2010 to 2016.

Presentation of the claim

In order for a tax-exempt business or organization to successfully claim this tax credit, it must file Form 8941, Credit for Small Employer Health Insurance Premiums. These forms allow employers to list employees and premiums paid and calculate the qualified credit they will claim for a given tax year. The qualified employer must also claim the final amount of the health care tax credit on Form 3800, General Business Credit as part of the general business credits.

It is also important that employers retain relevant documentation to support the claim in the event of an IRS audit. Supporting documentation includes receipts for paid premiums or a statement from your health care provider.

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