ACA Small Biz Tax Credit: What you NEED to know!

How does it affect you?

For tax  years beginning in 2014, changes to the tax credit will be as follows:

• The maximum tax credit will increase from 35% to 50% of premiums paid for small business employers and from 25% to 35% of premiums paid for small tax-exempt employers (ex: charities).
  
• To be eligible for the tax credit, a small employer must pay premiums on behalf of employees enrolled in a qualified health plan offered through a Small Business Health Options Program (SHOP) Marketplace. 
• The credit will be available to eligible employers for two consecutive tax years. 

How do you know if you can claim a credit?

According to the IRS website, to be eligible, you must cover at least 50% of the cost of single (not family) health care coverage for each of your employees. You must also have fewer than 25 full-time equivalent employees (FTEs), and those employees must have average wages of less than $50,000 (as adjusted for inflation beginning in 2014) per year. 

How is the amount of your credit determined?

The smaller the business or charity, the bigger the credit. If you have more than 10 FTEs or if the average wage is more than $25,000, the amount of credit you receive will be less. 

How do you claim the credit?

By contacting the IRS Business line at 1-(800)-829-1000, online at IRS.gov, or contact your accountant for more information on how to claim the credit on your next tax return. 

Visit these sites for specific information regarding the Affordable Care Act’s Small Business Tax Credit.
http://www.irs.gov/uac/Small-Business-Health-Care-Tax-Credit-for-Small-Employers
http://www.irs.gov/uac/Small-Business-Health-Care-Tax-Credit-Questions-and-Answers:-Determining-FTEs-and-Average-Annual-Wages