One of the key initiatives affecting small businesses and their employees from the two health care bills passed in March is the Small Business Health Care credit. Postcards were sent to most small employers to pique their interest about this opportunity.

This new credit for small businesses through 2013 offers an incentive to increase the employer financial participation in its employees’ health insurance. Firms with fewer than 25 employees and average wages under $50,000 can receive a credit of up to 35% of the cost of employer-paid coverage, with the full credit limited to companies employing 10 or fewer full-time staff averaging under $25,000 each.

In a few cases, an employer with up to 50 employees may be eligible with the right mix of part-time and full-time employees. Not-for-profit entities are also eligible for up to a 25% credit.

To be eligible, the employer must provide at least 50 percent of the single rate cost of health care coverage for some of its employees. The credit is a bit complicated to compute, but essentially uses an average of the hours of all employees, not including overtime, to determine the average wage.

If that average is under $25,000, the full credit is likely available. Between $25,000 and $50,000, the credit begins to phase out, with nothing available if the average is above $50,000. The credit is scheduled to become more robust beginning in 2014.

As with most tax laws with specific rules of implementation, advanced planning can help your chances of benefitting from these cost-saving tactics. Don’t let this opportunity pass you by without considering if it can help you and your employees with health care coverage. We can help you with that planning.

As the Department of Health and Human Services develops these regulations, much more will be learned about this new law…and many new forms will be developed. So stay informed and give us a call now if you’re ready to get started:  904-396-5400.

Filed under: Tax by Mark Patrick