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Healthcare Tax Credit: What is it, Who Qualifies


It's not too late to get the small business Healthcare Tax Credit, so if you are not already taking advantage of it, you should definitely see if you qualify! This is a relatively new tax credit, started in 2010, to help small businesses offset the cost of providing health insurance for their employees. 

The point of the credit is to motivate small business owners to either offer their employees health insurance for the first time, or to keep the health coverage they already have. The maximum tax credit is 35% for small business employers, and small tax exempt employers, like charities or non profits. In 2014, the tax credit is expected to increase to 50 percent for small businesses, and 35 percent for tax exempt employers. To claim the credit, you will need to use Form 8941 when you file your taxes. If you are a small business employer, you might be able to carry this credit backward to previous years or forward to future years, so don't forget to ask your tax professional about this!

How do you qualify for the Healthcare Tax Credit? First of all, you must cover at least 50 percent of the cost of single (not family) health care coverage for your employees. You must have less than 25 full time equivalent employees. Also, those employees must have average wages of less than $50,000 per year.

To determine what a full time equivalent employee actually is, the IRS has developed some guidelines to help. Basically, two part time workers count as one full time worker. For example if you have ten part time employees, you will only have FIVE full time equivalent employees. It is also important to know that the Healthcare tax credit operates on a sliding scale. The smaller the business, the bigger the credit will be. If you have more employees, or your employees make more, your credit will be less. The IRS has developed a handy guide which is found on their site to help you determine if you are eligible for the Healthcare Tax Credit. Check it out today, you don't want to miss out!

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