The IRS today released a final guidance for small employers eligible to claim the new small business health care tax credit for the 2010 tax year. Included in the Affordable Care Act enacted in March, the small businesses health care tax credit is designed to encourage both small businesses and small tax-exempt organizations to offer health insurance coverage to their employees for the first time or maintain coverage they already have.
The new guidance addresses small businesses questions about which firms qualify for the credit by clarifying that a broad range of employers meet the eligibility requirements, including religious institutions that provide coverage through denominational organizations, small employers that cover their workers through insured multiemployer health and welfare plans, and employers that subsidize their employees' health care costs through a broad range of contribution arrangements.
In general, the credit is available to small employers that pay at least half of the premiums for single health insurance coverage for their employees. It is specifically targeted to help small businesses and 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 or more FTEs or that pay average wages of $50,000 or more per year. Because the eligibility rules are based in part on the number of FTEs, not the number of employees, employers that use part time workers may qualify even if they employ more than 25 individuals. For more tax updates visit us at Monster Tax.