Small Business Health Care Tax Credit Facts

Small Business Health Care Tax Credit Facts

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 your tax bill dollar-for-dollar. This credit is available to both employers providing medical care for the first time and employers who have provided medical care to their employees in the past. Below 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 employees or their equivalent. 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 a 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, starting in 2014, the credit goes up 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 the 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

For a tax-exempt business or organization to successfully claim this tax credit, they must file Form 8941, Small Employer Health Insurance Premium Credit. 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 for employers to keep relevant documentation to support the claim in the event of an IRS audit. Supporting documentation includes receipts for premiums paid or a statement from your health care provider.

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