2010-05-03 Affordable Care Act Tax Provisions

Date: 2010-05-03

Dependent Health Coverage

Health coverage for an employee's children under 27 years of age is now generally tax-free to the employee. Learn more by reading this news release or this notice.

Small Business Health Care Tax Credit

The Small Business Health Care Tax Credit helps small businesses and small tax-exempt organizations afford the cost of covering their employees.

Received a Postcard from the IRS?

Millions of small businesses will receive postcards from the IRS beginning the week of April 19 that alert them to the new Small Business Health Care Tax Credit and encourage them to check their eligibility. Even if you don't receive a postcard, your business still may be eligible. Read more about this effort. 

Eligibility Rules

  • Providing health care coverage. A qualifying employer must cover at least 50 percent of the cost of health care coverage for some of its workers based on the single rate.
  • Firm size. A qualifying employer must have less than the equivalent of 25 full-time workers (for example, an employer with fewer than 50 half-time workers may be eligible).
  • Average annual wage. A qualifying employer must pay average annual wages below $50,000.
  • Both taxable (for profit) and tax-exempt firms qualify.

Amount of Credit

  • Maximum Amount. The credit is worth up to 35 percent of a small business' premium costs in 2010. On Jan. 1, 2014, this rate increases to 50 percent (35 percent for tax-exempt employers).
  • Phase-out. The credit phases out gradually for firms with average wages between $25,000 and $50,000 and for firms with the equivalent of between 10 and 25 full-time workers. 

Three Simple Steps for Employers to Qualify

To determine if your small business or tax exempt organization qualifies for the Small Business Health Care Tax Credit, follow the three simple steps on our fact sheet.

Examples

Scenarios illustrate how the credit applies to employers in different circumstances.

Questions and Answers

Need more detailed information? We have answers.

YouTube Primer on Health Care Credit

This new video explains the who, what, why and how of the Small Business Health Care Tax Credit.

For More Information

News release IR-2010-38, New for 2010: Tax Credit Helps Small Employers Provide Health Insurance Coverage, gives a description of the credit and when and how to claim it.

Información en Español

Crédito Tributario por Cuidados de Salud para Pequeñas Empresas.

 

Page Last Reviewed or Updated: April 27, 2010

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