Qualifying for the Small Business Tax Care Credit
The Affordable Care Act was signed into law in 2010. Along with the requirement that every citizen carry health insurance, there have been many changes put in place in regard to employers. Each rule that has been put in place varies depending on the size of the company in question. Along with this, credits are available depending on a number of factors.
One credit that is especially beneficial is the small business tax care credit. This is something that was created in order to help small businesses have an easier time at paying for health insurance for their employees. It is also the intent that it will help encourage those employers to offer health insurance in the first place.
Does my Business Qualify for the Credit?
Originally, when this tax credit first came into the picture, businesses were able to apply for a tax credit of up to 35% of the health care premiums. However, this has now increased to 50%. There are a few qualifications that must be in place before a business qualifies for this credit.
- Must have fewer than 25 full-time employees
- Average salary must be below $50,000
- Must pay for at least 50% of the employees’ premiums for self-only coverage
Another important factor to keep in mind is that small businesses who fall into these categories were required to purchase health insurance through the Marketplace that was set up specifically for them. This was named the Small Business Health Options Program, or SHOP.
What if I don’t Owe Taxes?
Some businesses who qualify for this credit actually find that they do not owe taxes for the year that they qualify for the credit. If this is the case, the credit is still available. However, it will need to be carried forward or backwards to other tax years.
If your business is a tax-exempt organization, there are some other options that may apply. For example, it is possible that you will be able to receive the credit back as a refund. For this group of businesses, the tax credit will only be for 35% of the premiums rather than the full 50%.
Who Receives the Biggest Advantage?
There are many businesses that will qualify for this tax credit. However, the businesses that find the most benefit in it are those who have low to moderate income workers. In fact, the credit actually works on a sliding scale and the credit that is available will vary from one company to the next depending on the amount of money that is paid towards the employees’ premiums.
In order to receive the largest credit, you should make sure that you are paying at least half of your employees’ health care premiums. In addition to this, you should have 10 or fewer full-time employees who earn at or less than $25,000 per year.
In the first year that the credit was available, over 170,000 employers applied and qualified for this tax credit. Over the years that it has been available, it has awarded more than a billion dollars’ worth of credits to businesses around the country. While many businesses say that it is difficult to determine if you qualify for the credit, looking into it is definitely something that is worthwhile.
If you find that you are eligible for the credit, you should talk to your tax preparer in order to determine the exact forms that should be prepared. You should also discuss your tax liabilities for the previous year in case you are able to carry the credit back. For more information about the small business tax care credit and to determine if your business qualifies, be sure to contact us today.