Affordable Care Act
One of the biggest expenses of small businesses is health care. While this cost can be very high, there are a few health care tax credits that can help reduce the overall tax burden for a small business. These are the companies that drive America so it is in the government's best interest to help them out as much as possible.
Small business employers that give health care policies to their employees and that meet specific requirements normally are eligible for small business tax credits on the health insurance premiums they pay on behalf of certain employees.
To qualify, certain premiums paid by the employer on behalf of the employee qualify under certain circumstances. Under that arrangement, the employer pays premiums for each person enrolled in the health care plan in an amount greater than 50 percent of the total cost of the premiums.
There are certain caps and exclusions of this health care tax credit but the general rule to remember is that if the employer pays enough of the premium, they can claim the eligible small business tax credits.
For tax years 2010 - 2013, the maximum tax credit is 25 - 35 percent of the total expense for the insurance premiums that the employer pays. The different percentages will vary based on eligibility requirements of the company.
In the years prior to 2014, only the amounts paid to a qualified insurance issuer, like an HMO or insurance company, for a health care plan or covered under the tax law. The rules will change slightly after 2014 so be sure to research the matter for further detail.
Once an owner or company decides they are eligible, the credit is very easy to claim. There will be a place on the annual tax return that will the employer to claim this credit. Please note that tax exempt organizations are slightly different and it is best to contact a tax professional for further information. In many instances this can be used as a refundable credit for the non profit organizations, but each circumstance is different.
Some important benefits of the small business health care tax credit is that it can be used to offset any alternative minimum tax (AMT) that has to be paid for the year. Also, it can free up more money for the company to grow and even hire additional employees that will boost the local economy.
While most owners can tell if they are eligible for this small business credit or not, it is best to consult with a local CPA or tax professional to help maximize all your tax credits.