Pink Fire Pointer Healthcare Reform Update - 17May2010

Healthcare Reform Update - 17May2010

IRS Issues Guidance for Small Business Tax Credits,,id=223577,00.html

  • Today the IRS issued new guidance regarding the small business tax credits provided for by the federal healthcare reform law.

  • The small business tax credit is one of the first healthcare reform provisions to go into effect, and is designed to encourage small employers to offer health coverage for the first time or maintain coverage they already provide.

  • The credit takes effect this year and is worth up to 35 percent of a small business' premium costs. On Jan. 1, 2014, this rate increases to 50 percent (35 percent for tax-exempt employers).The credit phases out gradually for firms with average wages between $25,000 and $50,000, and for firms with the equivalent of between 10 and 25 full-time workers.

  • The announcement makes it easier for small businesses to determine whether they are eligible for the tax credit and how large a credit they will receive. A “qualifying employer” must:

    • Cover at least 50 percent of the cost of healthcare coverage for some of its workers based on the single rate

    • Have fewer than the equivalent of 25 full-time workers (e.g., an employer with fewer than 50 half-time workers may be eligible)

    • Pay average annual wages of less than $50,000

    • The guidance makes it clear that both taxable and tax-exempt firms qualify, and that small businesses receiving state healthcare tax credits may still qualify for the full federal tax credit. The guidance also allows small businesses to receive the credit for add-on dental and vision coverage in addition to regular health insurance.

  • Read the IRS press release:

  • Read the IRS’s three simple steps for determining if your business qualifies for the tax credit: