Reform Alert - News from the Blues' Office of National Health Reform

Some small group customers may be eligible for a tax credit under the new reform law

June 2, 2010

The government will provide a tax credit to some small business employers that pay at least 50 percent of their employees' health insurance premiums

The size of the credit depends on the average wages and number of employees. The tax credit is worth up to 35 percent of the employers' health care cost for businesses with up to 10 employees and average annual wages of up to $25,000. For example, if the employer contributes $100, the tax credit would be up to $35.

The tax credit phases out as the number of employees increases from 10 to 25, and also phases out as average wages increase from $25,000 to $50,000.

Tax exempt small businesses are also eligible, but their tax credit is up to 25 percent of the employers' health care costs.

Small business employers can use this IRS work sheet to determine if they qualify for the tax credit.

The tax credits are available retroactive to Jan. 1, 2010 and apply to both grandfathered and non-grandfathered health plans. Under national health care reform, grandfathered plans are those in existence on or before March 23, 2010. For more information, visit the IRS Small Business Health Care Tax Credit for Small Employers website.

IRS provides draft form to calculate tax credit

UPDATED: Sept. 17, 2010

The Internal Revenue Service provided a draft version of the form that small businesses and tax-exempt organizations can use to calculate the tax credit when they file income tax returns next year. The form can be accessed here (PDF). The final version of the form will be available later in the year.

More information was also provided about how tax-exempt organizations that are eligible for the credit can claim the credit during t he 2011 filing season.

More information about the small business tax credit, including a step-by-step guide (PDF), is available on the on the IRS website.

Forms and additional guidance available to help small businesses claim tax credit

UPDATED: Dec. 17, 2010

The Internal Revenue Service released final guidance for employers of eligible small businesses to claim the tax credit for the 2010 tax year. The guidance includes Form 8941, Credit for Small Employer Health Insurance Premiums, and Form 990-T. The IRS also provided instructions to Form 8941 and Notice 2010-82, both of which are designed to help small employers correctly figure and claim the credit.

The information on this website is based on BCBSM's review of the national health care reform legislation and is not intended to impart legal advice. Interpretations of the reform legislation vary, and efforts will be made to present and update accurate information. This overview is intended as an educational tool only and does not replace a more rigorous review of the law's applicability to individual circumstances and attendant legal counsel and should not be relied upon as legal or compliance advice. Analysis is ongoing and additional guidance is also anticipated from the Department of Health and Human Services. Additionally, some reform regulations may differ for particular members enrolled in certain programs such as the Federal Employee Program, and those members are encouraged to consult with their benefit administrators for specific details.