Small business owners: What is the small employer tax credit and how does it work?
As a small business owner, you’re not only responsible for the bottom line of your business, but also for the well-being of your employees. But business demands a lot of resources, and when the bottom line is low, it can be challenging to fulfill your commitment to employee wellness. Fortunately, under the new health care reform, eligible small business owners will qualify for an increased small employer tax credit, which will allow them to provide employee benefits at a lower cost.
So, what exactly is the small employer tax credit? And will your business be eligible? We’ll walk you through the basics so you can better understand how it all works.
Defining a small business
To receive a small employer tax credit, your small business must:
- Currently contribute at least 50 percent of the total premium cost of your employee’s health insurance.
- Have 25 or fewer full-time employees.
- Have employees who receive less than $50,000 each in average annual wages.
Does that describe your business? If so, here’s how the tax credit works:
- Through 2013, qualified employers are eligible to receive a tax credit of up to 35 percent of the money spent on health insurance premiums.
- Starting in 2014, the tax credit will increase to 50 percent, making health insurance that much more affordable for small business owners.
- Want to estimate what will be your annual tax credit? Small Business Majority has a useful calculator you can use to approximate your credit based on your individual business’ credentials.
If you’re still not sure you can provide health insurance to your employees there are a number of great resources on individual plans where you can direct your employees. There are also great resources for employers on [email protected].
Have more questions about the small employer tax credit? To learn more, ask questions and see answers, visit Health Insurance Central.