Q: We are a small school with 15 employees. I heard we could get money back for offering health insurance to our employees.If this is true, how do we apply or qualify for this?
A: The rumor is true, you are correct. The Affordable Care Act includes a Small Business Health Care Tax Credit. Starting in 2014, the tax credit for tax-exempt organizations equals up-to 35% of the employer contribution towards health insurance premiums. (Non-tax exempt organizations is 50% of the employer contribution). To be eligible you must have fewer than 25 full-time equivalent employees (FTEs), an average payroll of less than $50,000, and pay a uniform percentage of at least 50% of the health insurance premium.
To count FTEs, add up all your employees' hours for the tax year (not more than 2080 per employee) and divide by 2080. (If not a whole number, round down.) For the average payroll, take your W-2 income and divide by your FTE number.
To see if you qualify and for an approximate credit, go to Small Business Majority’s online tax credit calculator.
To receive the credit as a nonprofit, you’ll need to fill out an IRS form 990-T (Exempt Organization Business Income Tax Return) along with form 8941 (Credit for Small Employer Health Insurance Premium). The credit can be seen on your payroll taxes withheld during a calendar year.
For more information on the tax credit, visit the IRS web site.
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