Many people over the last few weeks have been asking me how the new legislation is going to effect small businesses (Under 25 employees) and how the Tax Credit will work. So I decided to dedicate this week’s column to better illustrate how this Credit will be administered and who will benefit.
Small Businesses and Tax Exempt Organizations that have fewer then 25 full-time employees with an average wage of less then $50,000 per employee are eligible for a new federal tax credit. (www.IRS.gov) This credit is designed to act as an incentive for small business owners to offer health insurance to their employees, or to maintain coverage they currently offer.
The credit will be in effect for small businesses owners who pay AT-LEAST half the cost of individual coverage for their employees in 2010 and will be applied on their 2010 income tax return. The Maximum credit is 35% of the premiums paid by the business for the prior year’s coverage, with the amount reaching 50% by 2014.
Here’s an example
The single rate for an employee is $4,000.00 per year, and the business pays 50% ($2,000.00). At the end of the year the business would receive a Federal Tax Credit of 35% of the $2000.00 it paid which would be $700.00.
As I receive more information I’ll post more about any additional updates to the credit.
If you have any questions or concerns please contact me at (631) 338-9917.
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