Small Business Healthcare Tax Credit

If you own or operate a small business you know that providing health insurance for you and your employees is expensive and has been out of reach for the majority of you for quite some time.  To remain competitive with larger employers, an employee benefits package can be an integral part of salary negotiations with a new hire or with an associate being wooed by another suitor.  With medical coverage at the top of the list, along with sick/vacation time and a retirement plan, too often small business owners have made the choice to go without rather than take on the significant expense that some of these plans can add to the bottom line.

It is time now to revisit the decisions of the past in light of a few recent developments.  Within the new healthcare reform legislation there is a tax credit available to help small businesses and small tax-exempt organizations afford the cost of covering their employees.  It is targeted at those with low- to moderate-income workers.  The credit was created to encourage small employers to offer health insurance coverage for the very first time or to maintain the coverage they already have.  Many small businesses are currently looking to adopt a group health plan with this new tax advantage.

Who is eligible?

An employer must cover at least 50 percent of the cost of health care coverage for some of its workers based upon the single rate.

The business must have less than the equivalent of 25 full-time workers (i.e., an employer with fewer than 50 half-time workers may be eligible).

The average annual wages of all employees must be below $50,000.

How much credit can you anticipate?

The credit is worth up to 35 percent of an employers premium costs in 2010.  On January 1, 2014, this rate will increase to 50 percent (35 percent for tax-exempt employers).

It gradually phases out for firms with average wages between $25,000 and $50,000 and for firms with the equivalent of 10 to 25 full-time workers. 

Is setting up a group health insurance arrangement right for you and your business? 

Call us at (860) 643-2500.  We’d be happy to dig into the finer details of your situation to see if the new tax credit would benefit you and your company.