IRS Announces 2010 Tax Credit to Help Small Business Employers Provide Health Insurance

Yesterday the IRS Announced a new Tax Credit that will help many small business and tax-empty organizations that provide health insurance coverage for their employees. 

The Patient Protection and Affordable Care Act, a tax credit included in the health care reform legislation, is designed to encourage small employers to offer health insurance overage for the first time or maintain coverage they already have.

Patient Protection and Affordable Care Act, Tax Credit Facts:

- The maximum credit is 35% of the premiums paid by 2010 by eligible small business employers

- 25% of the premiums paid by eligible small business employers and 25% of premiums paid by eligible employers that are tax-exempt organizations.

-In 2014, the maximum credit increased to 50% of premiums paid by eligible small business employers and 35 percent of premiums paid by eligible employers that are tax-exempt organizations.

-The maximum credit goes to smaller employers — those with 10 or fewer FTEs — paying annual average wages of $25,000 or less.

-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.

“This credit provides a real boost to eligible small businesses by helping them afford health coverage for their employees,” said IRS Commissioner Doug Shulman. “We urge small businesses and tax-exempt employers to look closely at this important tax break — which is already effective — to see if they qualify.”

Purpose: The credit is specifically targeted to help small businesses and tax-exempt organizations that  employ mostly low and moderate income workers. It is generally available to employers that have fewer than 25 full-time equivalent (FTE) employees paying wages averaging less than $50,000 per employee per year. Many businesses will qualify even if they employ more than 25 individual workers.

The IRS hasn't made all the details for the Tax Credit public yet, but I'll update you with the details when they do.