In reading the new health care law, I see that there is a credit of
35% for small businesses (fewer than 10 employees, average wages 25k each) from 2010 to 2013. From 2014 to 2015, the credit is increased to 50%. But in 2016 the credit goes away. Am I reading this right? What is the rationale for this?wrote
Best guess, to get businesses to buy and offer health insurance to their employees, and I suppose they figure that once you have it as a benefit, you'll not drop it in 2016.
It's apparently available now, but I haven't seen anything on it. I suspect that once someone writes the regs we'll know.
I can't find the sunset provision you refer to. Please tell us your reference for the 2016 sunset.
health care law, I see that there is a credit of
A related question -- is the 25k indexed for inflation?
QUOTE:
Small business tax credits
Provide small employers with no more than 25 employees and average annual wages of less than $50,000 that purchase health insurance for employees with a tax credit.
? Phase I: For tax years 2010 through
2013, provide a tax credit of up to 35% of the employer?s contribution toward the employee?s health insurance premium if the employer contributes at least 50% of the total premium cost or 50% of a benchmark premium. The full credit will be available to employers with 10 or fewer employees and average annual wages of less than $25,000. The credit phases-out as firm size and average wage increases. Tax-exempt small businesses meeting these requirements are eligible for tax credits of up to 25% of the employer?s contribution toward the employee?s health insurance premium.? Phase II: For tax years 2014 and later, for eligible small businesses that purchase coverage through the state Exchange, provide a tax credit of up to 50% of the employer?s contribution toward the employee?s health insurance premium if the employer contributes at least 50% of the total premium cost. The credit will be available for two years. The full credit will be available to employers with 10 or fewer employees and average annual wages of less than $25,000. The credit phases-out as firm size and average wage increases. Tax-exempt small businesses meeting these requirements are eligible for tax credits of up to 35% of the employer?s contribution toward the employee?s health insurance premium.
This sentence might mean that a given business can claim the credit only twice, in two tax years, as opposed to every year indefinitely.
However I can't find this in the text of the Bill itself.
Steve
This is exactly what Section 45R says. It uses what is called a "credit period". The credit period is defined as two consecutive tax years. Prior to 2014, the credtperiod is waived. For 2014 and thereafter, the small business can get the credit for insurance purchased through an Exchange for the credit period (two consecutive tax years). The credit itself, does not sunset.
Do you have a link for the actual bill as passed, PL 111-148?
I am resurrecting an old thread because I happen to be putting together a presentation on the Small Business Health Care Tax Credit (provision of the PPACA which began with 2010 tax year).
In my research I too wondered about the language of the law that says in effect "beginning 2014, employer can only claim the credit for two consecutive years". This has lead many to believe, erroneously, that the credit ends after 2015 tax year.
Here, for example, is a very recent CCH Tax Briefing which contains the error (CCH is one of the bigger tax research, education, and publishing services out there).
See Page 7 third column.
Now, here's the new bonus question: does this mean any given employer gets a "lifetime" max of two consecutive years beginning 2014 (including employers who begin providing employee health insurance at any time after 2014)? Or does it mean that employers will fall into a repeating three-yer cycle of two years on, one year off, for the credit?
I'll try earnestly to interpret the law on this at some point, but maybe someone will beat me to it...
Answer: it's the first "bonus question" choice, according to IRS. Not a repeating cycle.
I agree. Starting in the first year after 2013 that a small employer becomes eligible, a two consecutive year window opens. E.g. 1. An employer becomes eligible in 2014. As such, the credit is available for only 2014 and 2015. To get the credit the employer must meet the criteria for each year. If the employer fails in 2015, too bad... the credit is no longer available. 2. An employer has too many employees to be eligible until 2016. That opens a two year window for 2016 and 2017 to get the credit.
P.S. CCH got it right in the original briefing after the law passed in 2010.
BeanSmart website is not affiliated with any of the manufacturers or service providers discussed here. All logos and trade names are the property of their respective owners.