How to file for the Health Care Tax Credit | Small Business ...

How to file for the Health Care Tax Credit

If your business pays a portion of your employee?s heath care insurance, ask your tax preparer about claiming this hidden credit.

A tax credit is an actual refund of the tax dollars you pay to the federal government, and can go a long way in helping your business mitigate the cost of providing health care coverage.

Two ?qualifiers

• The employer must cover at least 50% of the health care coverage for each employee
• Business ?must have less than 25 full-time equivalent employees (FTEs) with an average wages of less than $50,000 per year. What constitutes a full-time equivalent employee? Basically, two half-time workers count as one full-timer. For example, 20 half-time employees are equivalent to 10 full-time workers. This makes the number of FTEs 10 not 20

Furthermore, if your firm has total wages of $200,000 (excluding owner compensation) and has 10 FTEs, to figure average wages you divide $200,000 by 10 (the number of FTEs). The result is your average wage of $20,000.

Also, the amount of the credit you receive works on a sliding scale?the smaller the business, the bigger the credit. So, if you have more than 10 FTEs or if the average wage is more than $25,000, the amount of the credit you receive will be less.

There are several online calculators that can help you. Visit the National Federation of Independent Business? credit calculator to see what you?d get.

To take the credit, you must use: Form 8941, Credit for Small Employer Health Insurance Premiums. The calculated credit amount is transferred to: Form 3800 line-h, Small employer health insurance premiums.

There?s one final item to consider! Most businesses in Florida are typically flow-through entities, such as S-corporations or Partnerships. The tax credit is allocated to each shareholder based on their percent of ownership. It?s reported on Line 13 of the K-1 and is incorporated into the individual?s personal tax return as a tax credit or reduction in income taxes.

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