Small businesses can claim new health care tax credit in 2010

December 20, 2010 IRS News

A look at the IRS’s new guidelines for eligibility ...

Earlier this month, the IRS released the final guidelines for small employers and tax-exempt
organizations that are eligible to claim the new small business health care tax credit for the 2010
year.

The small business health care tax credit is designed to encourage small businesses and tax-exempt
organizations to offer health insurance to their employees for the first time or maintain the coverage
they already have as part of the Affordable Care Act enacted in March.

In general, the credit is available to small employers that pay at least half of the premiums for single
health insurance coverage for their employees and is specifically targeted to help businesses and
organizations that primarily employ moderate- and lower-income workers.

To Be A Qualified Employer:

• The employer must have fewer than 25 full-time equivalent employees (“FTEs”) for the tax
  year
• The average annual wages of its employees for the year must be less than $50,000 per FTE
• The employer must pay the remiums under a “qualifying arrangement”

For Small Businesses:

• Credit can be claimed 2010-2013 and for any two years after
• For tax years 2010-2013, the max credit is 35% of premiums paid
• Beginning in 2014, the max tax credit will increase to 50% of premiums paid
• Eligible businesses will use Form 8941 to figure the credit and include the amount of the
  credit as part of the general business credit on its income tax return.

For Tax-Exempt Organizations:

• Credit can be claimed 2010-2013 and for any two years after
• For tax years 2010-2013, the max credit is 25% of premiums paid
• Beginning in 2014, the max tax credit will increase to 35% of premiums paid
• Tax-exempt organizations will use Form 8941 to figure their refundable credit, and then
  claim the credit on Line 44f of Form 990-T.
• Form 990-T is primarily filed by organizations that are liable for the tax on unrelated business
  income. In this instance, it will also be used by any eligible tax-exempt organization to claim
  the credit, regardless of whether they are subject to this tax.

Form 8941, Credit for Small Employer Health Insurance Premiums, and the revised Form 990-T are now available online on IRS.gov to help navigate the forms, the IRS has also posted instructions on its website to help small employers figure the claims correctly.

Click on these links for Form 8941 and Notice 2010-82.  More information about the credit, including a step-by-step guide to claiming the credit is available on the Affordable Care Act page on IRS.gov.

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