From IRS: What Employers Need to Know About Claiming the Small Business Health Care Tax Credit
Many small business employers that pay at least one-half of the premiums for
employee health insurance coverage under a qualifying arrangement may be eligible
for the small business health care tax credit. This credit can enable small businesses
and small tax-exempt organizations to offer health insurance coverage for the
first time. It also helps those already offering health insurance coverage to
maintain the coverage they already have. The credit is specifically targeted to
help small businesses and tax-exempt organizations that primarily employ 25 or
fewer workers with an average income of $50,000 or less.
Here is what small employers need to know so they don’t miss out on the credit for tax year 2010:
- Tax-exempt organizations that file on a calendar year basis and requested an extension to file to November 15 can use Form 8941 and then claim the credit on Form 990-T, Line 44f.
- Businesses who have already filed can still claim the credit. For small businesses that have already filed and later determine they are eligible for the credit, they can always file an amended 2010 tax return. Corporations use Form 1120X and individual sole proprietors use Form 1040X.
- Businesses that couldn’t use the credit in 2010 may be eligible to claim it in future years. Some businesses that already locked into health insurance plan structures and contributions for 2010 may not have had the opportunity to make any needed adjustments to qualify for the credit for 2010. So these businesses may be eligible to claim the credit on 2011 returns or in years beyond. Small employers can claim the credit for 2010 through 2013 and for two additional years beginning in 2014.
For tax years 2010 to 2013, the maximum credit for eligible small business employers
is 35 percent of premiums paid and for eligible tax-exempt employers the maximum
credit is 25 percent of premiums paid. Beginning in 2014, the maximum tax credit
will go up to 50 percent of premiums paid by eligible small business employers
and 35 percent of premiums paid by eligible tax-exempt organizations.
Additional information about eligibility requirements and calculating the credit can be found on the Small Business Health Care Tax Credit for Small Employers page of IRS.gov.