Study: Many small businesses missing out on health-care credit
Millions of small businesses that provide health insurance to their employees are missing out on a tax break that could help pay for those costs, according to a report from Families USA and Small Business Majority.
Though more than 3.2 million small businesses with fewer than 25 employees are eligible to claim the new small business health-care tax credit, only an estimated 360,000 took advantage of it for the 2011 tax year, according to the study, “Good Business Sense: The Small Business Health Care Tax Credit in the Affordable Care Act.”
For tax years 2010 through 2013, the maximum credit is 35 percent of health premiums paid for small business employers and 25 percent for small tax-exempt employers such as charities. On Jan. 1, 2014, the rate will increase to 50 percent for small businesses and 35 percent for charities. If no tax is owed for a particular year, the credits may be carried back to previous years or forward to future tax year. Or, a business may be eligible to receive the credit as a refund.
According to a separate survey conducted by the Kaiser Family Foundation in the first half of 2011, only 29 percent of businesses that offered health coverage said they had attempted to determine if they were eligible for the new tax credit. Among small businesses that did not offer health insurance, only half were even aware of the credit.
To qualify for the tax credit, small businesses must cover at least 50 percent of each employee’s health insurance premium. Small businesses that employ part-time workers are also eligible for help, and their credits are calculated by determining the number of “full-time equivalents” they employ.
The study did not address the possibility that the Affordable Care Act could be ruled unconstitutional by the U.S. Supreme Court later this year.