Small Business Health Care Tax Credit ~ Fewer than 10% have taken!

Part of last year’s health care reform included a small business health care tax credit that generally applies to small employers who pay at least one-half the cost of health insurance coverage for their employees (specifics below).

This past September 19th the Department of the Treasury issued a report addressing progress, problems and the like, interestingly:

  • The IRS estimated that as many as 4.4 million businesses potentially qualify for this credit.
  • Through mid-May the report indicates that just over 228,000 credits had been taken (Since the September 19, 2011 report was issued the acting Assistant Treasury Secretary for Tax Policy blogged last week that 309,000 small businesses and their owners have taken the credit).

Let’s assume that 4.4 million that potentially qualify and 309,000 small businesses have taken the credit are at least “close” — over 90% of eligible small businesses have not taken this credit.

Do you think maybe you should consider?

I’ve linked to the requisite form 8941 which is where the process starts.


Employer must have the following characteristics:

  • Have fewer than 25 full-time equivalents (FTE)5 for the taxable year.
  • Have average annual wages for its employees for the year less than $50,000 per FTE.
  • Maintain a “qualifying arrangement.”6
  • Not be an agency or instrumentality of Federal, State, local, or Indian Tribal Governments.
  • If a tax-exempt organization, be described in Internal Revenue Code section 501(c) and be exempt from tax under section 501(a). Tax-exempt entities do not qualify if these sections do not apply.

5 FTEs, as defined by the legislation, mean a number of employees equal to the number determined by dividing the total number of hours of service for which wages were paid by the employer to employees during the taxable year by 2,080. Additional guidance on FTEs is also provided in the legislation and in IRS Notice 2010-44.

6 An arrangement under which the employer pays premiums for each employee enrolled in health insurance coverage offered by the employer in an amount equal to a uniform percentage (not less than 50 percent) of the premium cost of the coverage.




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