Home > Uncategorized > Health Care Reform Small Business Tax Credit FAQ

Health Care Reform Small Business Tax Credit FAQ

Who qualifies for the tax credit?
To qualify for the tax credit, a small employer must:

  • Employ fewer than 25 full-time equivalent employees (“FTEs”) during the tax year;
  • Have average annual wages of less than $50,000 per FTE for the tax year;
  • Contribute at least 50% of the premium cost (based on the premium rate for single,
  • employee-only coverage) for health coverage provided to employees during the tax year.

What is the maximum tax credit amount?

  • The amount of the tax credit for a qualifying small employer will vary depending on the number of employees, the average annual wages, and the cost of the premiums paid by the employer.
  • Qualifying small employers with: 1) 10 or fewer full-time equivalent employees, and 2) average annual wages of $25,000 or less, will be eligible for the full 35% tax credit.
  • Beginning with the 2014 tax year, the maximum tax credit will be increased from 35% to 50%.

How does a qualifying employer claim the credit?

  • The credit is claimed on the qualifying small employer’s annual income tax return. For a tax-exempt employer, the IRS will provide further information on how to claim the credit.
  • If the amount of the credit exceeds an employer’s income tax liability for a tax year, the credit can generally be carried forward for 20 years or carried back one year (except that it may not be carried back to a year before the credit became effective, or 2010).

For more information: http://insurance.illinois.gov/hiric/resources/sbctc.pdf

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