Barry Ripp ~ East Bay Area Real Estate

Many small businesses that provide health insurance coverage to their employees now qualify for a special tax credit, according to the Internal Revenue Service (IRS). Included in the health care reform legislation, the credit is designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they’re currently offering. The credit is available to small employers that pay at least half the cost of single coverage for their employees.

For example; small employers are considered to have fewer than 25 full-time equivalent (FTE) employees paying wages averaging less than $50,000 per employee per year. However, because the eligibility formula is based in part on the number of FTEs, not the number of employees, many businesses will qualify even if they employ more than 25 individual workers.

The maximum credit is 35 percent of premiums paid in 2010 by eligible small business employers. Eligible small businesses can claim the credit as part of the general business credit starting with the 2010 income tax return they file in 2011. For tax-exempt employers, the IRS will provide further information on how to claim the credit.