Small businesses have felt the brunt of the broken health care system–on average, they pay up to 18% more than large firms for the same health insurance policy and have seen their health care costs grow 129% since 2000. In addition, only 45% of America's small businesses can afford to offer health benefits–which means the majority of uninsured Americans are small business owners, employees, and their families. The Affordable Care Act puts American families and small business owners–not the insurance companies–in control of their own health care.
One of the many provisions in the new law that helps small businesses are tax credits to help offer employee health insurance coverage–if they choose to do so. More than 60% of small employers, or more than 4 million firms, are eligible for these credits and they can start taking advantage of them right now. Last month, the IRS started mailing out postcards to ensure small businesses are aware that if they provide coverage for their workers, they can receive immediate help with their premium costs (and firms that initiate coverage this year will get a tax cut as well).
Today, the IRS announced a number of details of how the tax credit works to make it easier for small business owners to take advantage of tax credits, including:
that the new tax credit will not be reduced by a state health care tax credit or subsidy (except in limited circumstances to prevent abuse of the credit);
that small businesses can receive the credit not only for traditional health insurance coverage but also for add-on dental, vision, and other limited-scope coverage; and
detailed guidance on how a small business can determine whether it is eligible and how large a credit it will receive.
The tax credit is available to small businesses with 25 or fewer employees and an average wage of $50,000 or less that provide health insurance for their employees. Companies with 10 or fewer employees and an average wage of $25,000 or less get the maximum credit–35% of what the employer is paying for employee insurance coverage. The maximum credit rises to 50% in 2014. The tax credit is also available to small non-profits. For non-profits, the tax credit is worth up to 25% of what the employer is paying for employee insurance coverage. The maximum credit for non-profits rises to 35% in 2014.
Read a summary of the guidance and examples of how small businesses can take advantage of the credit» Read the guidance (Notice 2010-44)»
Get answers to frequently asked questions on the credits on IRS.gov»
Download our guide on the Affordable Care Act and small businesses»
Speaker Pelosi on today’s news:
These new guidelines will help make the benefits of health insurance reform a reality for even more of America's small businesses. They will ensure that our entrepreneurs and business owners — the engines of our economic growth — can take full advantage of measures to reduce costs and have every opportunity to create jobs, grow, and thrive.
Congressional Republicans oppose this progress for our small businesses and economy. Every time they call for repeal, small businesses should hide their wallets — because Congressional Republicans will sacrifice gains for small business to protect insurance company profits and a status quo of skyrocketing costs. Democrats are giving Main Street the tools it needs to compete, succeed, innovate, and do right by their employees.