PROVIDENCE -- In a nationwide survey last year of over 2,000 randomly selected public and private employers offering health benefits, only 29% of employers with 50 or fewer workers said they attempted to determine if they were eligible for the Small Business Health Care Tax Credit. The survey was conducted by the Kaiser Family Fund and is available on its web site (http://ehbs.kff.org/pdf/2011/8225.pdf). Lt. Governor Elizabeth Roberts, Chair of both the Rhode Island Healthcare Reform Commission and the Small Business Advocacy Council, wants to improve those numbers in Rhode Island.
"The Small Business Health Care Tax Credit was made available as part of the Affordable Care Act to help employers with low and moderate income workers afford the cost of providing coverage for their employees," said Lt. Governor Roberts. "In a state with approximately 24,000 small businesses, my aim is to make sure these employers know about the tax credit and take advantage of this valuable opportunity," said Roberts.
The tax credit, which is effective immediately, can cover up to 35% of the premiums a small business pays to insure its workers. The Congressional Budget Office estimates that the tax credit will save U.S. small businesses $40 billion by 2019.
Who is eligible for the credit?
Generally, employers that have fewer than 25 full-time equivalent (FTE) employees and pay wages averaging less than $50,000 per employee per year may qualify for the credit. Because the eligibility formula is based in part on the number of FTEs, not the number of employees, employers that have more than 25 individual workers may also qualify if some of their workers are part-time.
How much is the tax credit?
For each year from 2010 through 2013, the maximum credit is 35% of premium costs paid by eligible small businesses. An enhanced version of the credit will be effective beginning in 2014, when the rate will increase to 50%. The maximum credit is 25% of premium costs for eligible tax-exempt organizations.
How and when can the credit be claimed?
The credit went into effect on January 1, 2010, and is available this year to businesses filing their 2011 tax returns. Filers must use Form 8941 - Credit for Small Employer Health Insurance Premiums. Some restrictions apply. More details can be found on the RI Healthcare Reform Commission Web site at www.healthcare.ri.gov and from the IRS.