The Benefits of Health Care Tax Credit

In the United States, the government believes that everyone should be given the necessary health care they need. Last 2009, a new chapter in American health care opened as the President Barack Obama and the Democratic congress approved the Affordable Health Care for America Act. Enactment of this law happened on March of 2010. There are many tax provisions in this law. One of these provisions is the health care tax credit which benefits small businesses. Actually, small businesses in Arizona highly consider this health care tax credit.


Tax incentives are available for small business owners under the Small Business Health Care Tax Credit. Through this, their employees can be provided with group health insurance. This kind of incentive will encourage business owners with 10 or fewer employees to provide new coverage or maintain existing coverage to employees who are usually within lower tax brackets. Small business owners who pay for at least 50 percent of the health insurance costs of their employees can use a credit of up to 35 percent of the premium's costs to offset their tax liabilities annually from 2010 until 2013. In order to determine if a small business qualifies for this kind of tax credit, follow these three simple steps:

1. Determine the total number of your employees without counting its owners or family members.

• Calculate the number of employees who works full-time or at least 40 hours per week. Then, calculate the number of full-time equivalent of part-time employees by dividing the total annual hours of part-time employees by 2080. Add the two and you'll get the number of the total employees.
• If the total number is lesser than 25, proceed to step 2.

2. Calculate the average annual wages of employees without counting its owners or family members.

• Determine the annual wages paid to employees. Divide the annual wages to the number of employees.
• If the result is less than $50, 000, proceed to step 3.

3. If the small business owner pays for at least half of the insurance premiums for the employees at the single (employee-only) coverage rate, then you can file a Small Business Health Care Tax Credit to the Internal Revenue Service (IRS).

This kind of tax credit is quite new. There may be some things that a small business owner may find hard to understand. Consulting an Arizona Tax Lawyer is always the best option if you need one to guide you through the whole process.