The new Internal Revenue Service (IRS) Small Business Health Care Tax Credit helps small businesses

and small tax-exempt organizations afford the cost of covering their employees’ health care benefits.

Eligibility Rules

For-profit or tax-exempt employer groups may qualify; however, all three of the following criteria must be

met for any group to be considered eligible:

1. The employer must cover at least 50 percent of health care coverage costs for workers based on the employee-only (single) rate.

2. The employer must have no more than the equivalent of 25 full-time workers (not counting

owners or family members).

3. Employees’ average annual wages (not counting owners or family members) must be below $50,000.

Credit Amount

· The maximum credit is worth up to 35 percent of a company’s premium costs in 2010 (25 percent

for tax-exempt employers).

· Note that the rate will increase to 50 percent on January 1, 2014 (35 percent for taxexempt

employers).

· The credit gradually phases out for employers with average wages between $25,000 and

$50,000, and for employers with the equivalent of between 10 and 25 full-time workers.

The IRS is informing potentially eligible small business groups about this tax credit.