Are you looking for a way to get free money? Well, with this tax credit you’re not getting that, but if you’re familiar with the term “tax credit,” it means that you’re reducing the amount of tax liability. In this situation you’re able to take the amount spent on health insurance premiums and offset your tax liability.
Of course, this tax credit isn’t for everyone, but if you meet these guidelines we’ve laid out, you’re just one step closer to having happy employees and saving money at the same time.
Requirement 1 Employers who have 25 full-time equivalent employees or less.
Requirement 2 Employers whose employees make an average annual salary of $50,000 or less. Interestingly, owners and family members who work for the company are not counted while determining this step of eligibility.
Requirement 3 Employers who contribute 50% or more of the monthly health insurance premiums.
Now once you’ve determined that you meet these requirements, or at least you meet the first two and will meet the third once you offer coverage, you’ll be ready to take advantage of this wonderful tax credit.
A few things to keep in mind before moving forward are that this tax credit is not indefinite. You can only claim this tax credit for two years. Bummer…after those first two years, I know.
Also, the tax credit is the amount of your monthly employee contributions, so if you contribute more than 50%, like say…80%, you’re going to get that much more credit. However, this is where the details get hairy. The IRS also states that “only those with less than 10 FTE, making less than $10,000 in average annual wages, who pays at least 50% of employee premiums, will get the full credit.”
Now we’re scratching our heads thinking, I thought I got the credit when I paid 50% of these monthly premiums, well, that’s where I’d say to consult your local accountant or CPA. Each employer’s situation will calculate differently.