August 2013 Web Extra: Figuring the tax credit

August 2, 2013 -  By

Answer the following questions: Do you have 25 or fewer full-time employees? Are their average annual wages less than $50,000? And do you contribute more than 50 percent of your employee’s total premium costs?

If your answers are “yeses,” you may well receive some assistance with your health insurance premiums under the federal Affordable Care Act (ACA). You may be entitled to a tax credit of up to 35 percent of your contribution toward your employee’s health insurance for this tax year. The credit will increase to up to 50 percent for tax year 2014 and 2015.

For 2013, the full tax credit is available to employers with 10 or fewer employees whose average annual wages are $25,000 or less. The tax credit gradually scales down as workforce sizes and average wages increase.

Here’s an example. Suppose your business employs 10 full-time workers and the average wages are $25,000. If your annual employer health care costs are $70,000 you are entitled to a $24,500 credit in 2013. Starting in 2014 the credit will be $35,000.

For some help on calculating your own credit, see the guidance recently posted on the web site of the Internal Revenue Service. Go to www.irs.gov and click on “Affordable Care Act Tax Provisions” then see “Small Business Health Care Tax Credit.”

Or, visit www.smallbusinessmajority.org and go to “Healthcare Tax Credit” in the upper right hand corner. Click on “Go to Calculator.”

About the Author:

Phillip M. Perry is a freelance writer based in New York.

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