As the cost of health care has risen over the past decade, the percentage of companies providing health insurance to their employees has dropped from 57% in 2000 to 45% in 2007. This, among other political reasons, prompted health care reform. health care that will help small businesses. to provide health insurance to its employees while penalizing larger companies for not providing health insurance to their employees.
Since the plan was first announced earlier this year, a LOT of misconceptions have surfaced. The most common misconception was that this new plan will give a 35% tax credit to all small businesses that provide health insurance to their employees.
However, as we’ve seen in the plan details, here’s a more accurate representation of the Small Business Healthcare Tax Credit for small employers:
How to qualify as a small employer:
-Employer must pay at least half the cost of health insurance
-Employer must have less than 25 full-time equivalent employees (if a business has more than 25 employees, but the total number of hours worked is 50,000 or less, they may still qualify)
-The average annual salary must be $50,000 or less (total salaries divided by the equivalent number of full-time employees)
Credit Amount:
-35% is the maximum credit (in 2014, this maximum credit jumps to 50%). For Tax Exempt Companies, the maximum credit is 25%.
-The credit is partially eliminated for employers paying an average annual salary between $25,000 and $50,000 (for every $1,000 over $25,000, the credit is reduced by approximately 4%)
-The credit is partially eliminated for employers who employ between 10 and 25 full-time equivalent employees (for each employee greater than 10, the credit is reduced by approximately 6.67%)
be sure to visit michaelthanley.com often. I will continue to post updates throughout the year as more details emerge.