South By North Strategies, Ltd.

A new report from the Health Care Access Project of the North Carolina Justice Center summarizes the small business provisions of the federal health care reform law. From the report …

Beginning this year small businesses with fewer than 25 full-time employees are eligible for tax credits of up to 35 percent of the employer’s insurance premium contributions. To be eligible the employer must contribute at least 50 percent of the total premium for employee health coverage and have average wages of less than $50,000 per year.
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As an example, let’s take an employer with 9 full-time equivalent employees that pays average annual wages of $23,000. If the employer pays $72,000 in health care premiums then the business would qualify for a 2010 tax credit of $25,200. In 2014 the tax credit will increase to 50 percent of the employer’s insurance premium contributions. In our example that’s $36,000 in credits.
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The tax credit offsets an employer’s actual income tax liability or alternative minimum tax liability for the year, which means that businesses with no taxable income generally can’t claim the credit. Businesses can carry the credit forward for 20 years to help cover future tax liabilities. Businesses will claim the credit on their annual income tax return.