What Does the Small Business Health Care Tax Credit Mean for Your Business?

If you have a small business, you may be wondering how the upcoming Affordable Care Act will affect you. Basically, under this act, if you have a business that has 24 or less full-time-equivalent employees, you may qualify for a tax credit to help with your staff’s health care costs. Read on to learn more about this tax credit.

form 8541

What Will the Tax Credit Do?

As stated above, for you to qualify for the Small Business Health Care Tax Credit, you must have no more than 24 full time employees or an equivalent of 24 full time staff members with wages of less than $50,000. If you are found eligible in 2013, you can qualify for a tax credit up to 35 percent or 25 percent if your business is tax-exempt.

In the year 2014, this credit will rise to 50 percent or 35 percent for tax-exempt businesses. You can claim the Small Business Health Care Tax Credit during the years 2013 through 2016; however, you must be participating in what is known as the Small Business Health Options Program.

If your business only has enough employees to equal that of 10 or less full time staff members with wages of less than $25,000, you may qualify for the maximum tax credit. Furthermore, if you receive health care tax credits from the state, you may still qualify for the federal credit. Additionally, vision and dental care can qualify for the credit as well.

How Can You Claim the Credit?

If you meet the above requirements and would like to file for the Small Business Health Care Tax Credit, you will need to use the IRS Form 8941 to determine your eligibility and calculate the amount of your credit. You will then need to include your tax credit on line 44f of IRS Form 990-T.

Typically, Form 990-T is used by churches or church groups that have what is called Unrelated Business Income, or UBIT. Nevertheless, even if you do not have UBIT, if you want to claim the Small Business Health Care Tax Credit, you will need to file this form. Additionally, you need to file Form 990-T by May 15, 2013 for the fiscal year ending December 31, 2012.

Are There Any Disadvantages to the Credit?

While this tax credit was designed to benefit small businesses, there are some companies that are doubtful it will help them. The main reason for this is that the tax credits are only offered for a few years and since employers plan on having their employees for long periods of time, they feel that these temporary credits will have little positive effect in the long-term.

Furthermore, since businesses can only claim the credit if they have 24 or less full-time-equivalent employees, there are actually very few companies that will be eligible for the Small Business Health Care Tax Credit. Businesses that have 25 full-time-equivalent staff members will not be eligible!

How to Offset the Costs of Health Insurance

If you have a small business and wish to participate in the Small Business Health Options Program, there are several ways you can offset the costs of health insurance for your employees. If your budget allows, you can organize a wellness program, which will offer regular wellness coaching and/or partial payment to a local gym.

You can also offer your employees various options such as flexible benefit plans that will help you and your staff save on health care costs. Finally, you may wish to consider hiring a professional consultant to help your staff find the best deals on medical procedures and medications.

While there are some businesses that may doubt the benefits of the new Small Business Health Care Tax Credit, it very well can benefit you if you have 24 or less full-time-equivalent employees. When deciding whether or not to participate in the Health Options Program, keep in mind that healthy employees are often the most productive staff members on your team.

About the Author: Jayson Mullin is the Co-owner of Top Tax Defenders. They resolve state sales tax issues including problems with record keeping, unfilled taxes and tax audits.