Claim New Health Care Tax Credit With This IRS Form

There’s a lot contained in the Affordable Care Act—including new tax credits, health insurance exchanges, and other tools aimed at helping entrepreneurs provide health insurance coverage to their employees at a reasonable cost.  So much is in the legislation that it can be a bit intimidating to figure out exactly which aspects of the law affect your business.

One immediate effect: If you have less than 25 full-time equivalent employees with average annual wages below $50,000, you can take advantage of a tax credit. To help, Karen Mills, Chief Administrator for the Small Business Administration just announced the release of a one-page form and instructions on how to claim this credit for the 2010 tax year. You can find the information at the IRS website.

In general, the credit is available to small employers that pay at least half of the premiums for health insurance coverage for their employees. The smaller your business, the bigger the credit; companies with 10 or fewer employees benefit most. The guidance explains eligibility for the credit in more detail.

The credits are available for tax years 2010 through 2013 and for any two years after that. Through 2013, the maximum tax credit is 35 percent of premiums paid by small employers and 25 percent for eligible tax-exempt organizations. Beginning in 2014, those levels increase to 50 percent and 35 percent, respectively. In 2014, firms with up to 100 workers will be able to pool their buying power and reduce their administrative costs by purchasing coverage through a health insurance exchange.

The announcement was sent out by Administrator Mills. I’ve noticed the SBA is getting a lot better about tooting its own horn and keeping small business owners up to date about new programs and services. That’s a good thing.

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Rieva Lesonsky Rieva Lesonsky is a Columnist for Small Business Trends covering employment, retail trends and women in business. She is CEO of GrowBiz Media, a media company that helps entrepreneurs start and grow their businesses. Visit her blog, SmallBizDaily, to get the scoop on business trends and free TrendCast reports.

4 Reactions
  1. Rieva,

    We have six full time employees and three part time, and expect to add a number of staff this year. Our insurance went up 20% in September. According to our insurance company, it was as a direct result of the new health care legislation. They also told us we can expect another 15-20% increase in January.

    We can’t possibly afford benefits for our employees going forward. It was already expensive before, which was supposed to be one of the reasons for health care reform. The proposed health care credits don’t even offset the increases caused by the legislation.

    Health care already costs small businesses (under 20 employees) 35% more than big businesses. We just went up another 20% and another 15-20% in 2011. The puts us our health care costs at 75-80% disadvantage to big businesses. Not sure the SBA can tout giving a deduction that doesn’t even cover the existing gap or the recent increases as a “benefit”. “Partial relief” from the penalty of not being big might be more accurate.

    Also would be curious to see a list of other new SBA programs and services that benefit true small businesses under 20 employees. I’m not aware of any. As you know, the SBA doesn’t exist to help us – it’s focused on larger businesses over 50 employees.

  2. Chuck, I am not going to argue that Health Care Reform did any more than increase cost, however, you should be eligible for the Small Business Tax Credit. Check out the

    Also, if you have a healthy group, look into utilizing a MERP plan or HSA to cut your medical insurance costs.

  3. Justin,

    Nice calculator – thanks. We’ll check it out. and recommend it to other biz owners. We have a few thousand we’re working with in our 3to5 Clubs, workshops, and one2ones – will be good to get there feedback. We’re also building a comprehensive set of practical business tools for true small business owners (under 20 employees) – might want to see a calculator like this as part of the mix. We’ve got one app. done ( and another on strategic planning that will roll out in the next 8-12 weeks – five more behind. Once we get farther down the road on these we’ll connect.

    We’re in an HSA, but the recent hikes in health care costs simply make it prohibitive right now to offer health care for our folks. Hopefully if they dismantle the HC reform we can get this turned around to serve our employees, but not at this time.