Many small employers that pay at least half
of the premiums for employee health insurance coverage under a
qualifying arrangement may be eligible for the small business health
care tax credit. This credit can enable small businesses and small
tax-exempt organizations to offer health insurance coverage for the
first time. It also helps those already offering health insurance
coverage to maintain the coverage they already have. The credit is
specifically targeted to help small businesses and tax-exempt
organizations that primarily employ 25 or fewer workers with average
income of $50,000 or less.
Here is what small employers need to know so they don’t miss out on the credit for tax year 2010:
- Hurricane Irene, Tropical Storm Lee and other recent
disaster-related tax relief postponed certain tax filing and payment
deadlines to Oct. 31, 2011. Qualifying businesses affected by these
natural disasters still have time to file and claim the small employer
health care credit on Form 8941 and claim it as part of the general
business credit on Form 3800, which they would include with their tax
return. For more information on the disaster relief visit IRS.gov.
- Sole proprietors who file Form 1040, Partners and S-corporation
shareholders who report their income on Form 1040 and had requested an
extension have until Oct. 17 to complete their returns. They would also
use Form 8941 to calculate the small employer health care credit and
claim it as a general business credit on Form 3800, reflected on line 53
of Form 1040.
- Tax-exempt organizations that file on a calendar year basis and
requested an extension to file to Nov. 15 can use Form 8941 and then
claim the credit on Form 990-T, Line 44f.
- Businesses who have already filed can still claim the credit. For
small businesses that have already filed and later determine they are
eligible for the credit, they can always file an amended 2010 tax
return. Corporations use Form 1120X and individual sole proprietors use
- Businesses that couldn’t use the credit in 2010 may be eligible to
claim it in future years. Some businesses that already locked into
health insurance plan structures and contributions for 2010 may not have
had the opportunity to make any needed adjustments to qualify for the
credit for 2010. So these businesses may be eligible to claim the credit
on 2011 returns or in years beyond. Small employers can claim the
credit for 2010 through 2013 and for two additional years beginning in
For tax years 2010 to 2013, the maximum credit for eligible small
business employers is 35 percent of premiums paid and for eligible
tax-exempt employers the maximum credit is 25 percent of premiums paid.
Beginning in 2014, the maximum tax credit will go up to 50 percent of
premiums paid by eligible small business employers and 35 percent of
premiums paid by eligible tax-exempt organizations.
Additional information about eligibility requirements and calculating
the credit can be found on the Small Business Health Care Tax Credit
for Small Employers page of IRS.gov.
Small Business Health Care Tax Credit English | Spanish | ASL