Broader eligibility announced for healthcare tax credit

The Obama administration on Thursday released new guidance to help small businesses claim the tax credits they're eligible for under the healthcare reform law.

According to the administration, the new guidance "addresses small business questions about which firms qualify by clarifying that a broad range of employers meet the eligibility requirements," including:

  • Employers that pay for a portion of their employees' healthcare costs through a broad range of contribution arrangements. This includes firms that pay more to help older workers cover the higher premiums and firms that allow employees a choice of coverage;
  • Religious institutions that provide coverage through denominational organizations. While the credit is for employers that fully insure in most cases, denominational organizations that self-insure their coverage can qualify for the credit; and
  • Certain small employers that cover their workers through multi-employer healthcare and welfare plans. This is true as so long as 100 percent of the cost of coverage for all employees covered by the multi-employer plan is paid from employer contributions and not by employees.

In addition, the guidance includes a one-page form (Form 8941) and instructions to help small businesses claim the credit when they file their 2010 taxes.

The Democrats' law created a tax credit that could save small businesses as much as $40 billion by 2019, according to the Congressional Budget Office. Both for-profit and nonprofit organizations may qualify for the tax credit, but not the self-employed.

Eligible firms will get a 35 percent tax credit for their healthcare costs. To qualify for the full credit, businesses must have fewer than 25 employees, pay average annual wages below $50,000, and pay for most of their employees' health coverage.