Q: My sister has a BBQ restaurant in Texas. She only has 6 employees. Does this new health care reform bill require her to provide insurance? She currently doesn’t because she is in a very small business market and needs to know for the future.
A: The new law will not require your sister to provide insurance. However, it will provide your sister with tax credits if she chooses to provide insurance to her employees. Starting this year – indeed starting retroactively to January 1, 2010 – a new small business health care tax credit will be in effect that will provide a 35% tax credit on health premiums, with the credit increasing to 50% in 2014. Your sister’s restaurant is one of about 4 million firms that will be eligible for this tax credit, and small business owners can now find information on the tax credit online.
Q: What is the small business tax credit and how do I know if I am eligible?
A: Effective January 1, 2010, tax credits are available to qualifying small businesses that offer health insurance to their employees. So if your business qualifies for a tax credit, you are eligible right now. About 4 million small businesses will be eligible to receive tax credits if they provide insurance.
The tax credit is worth up to 35 percent of the premiums your business pays to cover its workers – 25 percent for nonprofit firms. In 2014, the value of the credit will increase to 50 percent – 35 percent for nonprofits.
Your business qualifies for the credit if you cover at least 50 percent of the cost of health care coverage for your workers, pay average annual wages below $50,000, and have less than the equivalent of 25 full-time workers (for example, a firm with fewer than 50 half-time workers would be eligible).
The size of the credit depends on your average wages and the number of employees you have. The full credit is available to firms with average wages below $25,000 and less than 10 full-time equivalent workers. It phases out gradually for firms with average wages between $25,000 and $50,000 and for firms with the equivalent of between 10 and 25 full-time workers. To learn more about the small business tax credit, you can also visit IRS.gov.
Q: Am I required to offer insurance to my employees?
A: No. There is not a so-called "employer mandate" in the legislation.
Q: Are there small business tax increases in this new law?
A: No. In fact, small businesses get tax breaks for health insurance rather than tax increases under the law.
Q: What if my small business doesn’t offer insurance today, but I choose to start offering insurance this year. Will I be eligible for these tax credits?
A: Yes. The tax credit is designed to both support those small businesses that provide coverage today as well as those that newly offer such coverage.
Source: Answers For Families and Small Business – HealthReform.gov
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