Time to SHOP for a Health Plan? IRS Fine Tunes the Tax Credit
The IRS recently issued proposed regulations fine-tuning the rules governing the healthcare tax credit available to certain small employers, beginning in 2014. The Affordable Care Act contains a credit of up to 50 percent of premiums for eligible employers. Keep reading to learn what the new proposed regulations add to the mix.
Time to SHOP for a Health Plan? IRS Fine Tunes the Tax Credit
The Affordable Care Act (ACA) contains a tax incentive for certain small employers to offer their employees a health insurance plan, and pay for at least half the cost. Employers eligible to take advantage of this provision are under the 50-worker “employer mandate” threshold, and thus not compelled by the ACA to “pay or play.”
Tax Credit Basics
For tax years 2010 to 2013, there is a maximum tax credit of 35 percent of premiums paid by qualified small business employers (25 percent of premiums for small tax-exempt organizations).
There are changes to the tax credit for 2014. The IRS recently proposed regulations updating and fine-tuning the original Section 45R rules governing the credit, beginning next year. In addition, the tax break will be more valuable to eligible employers starting in 2014.
In order to qualify for the full tax credit, employers cannot have more than 10 full-time employees or the equivalent with part-timers factored in. The tax credit decreases if an employer has between 10 and 24 full-time equivalent employees or pays average wages of between $25,000 and $50,000. It is unavailable for employers with 25 or more employees and average wages above $50,000.
