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Health Care Tax Credit Could Mean Savings For Small Businesses

October 06, 2011

One area where we have been advising some of our small business clients to explore this year for potential savings is a new Small Business Health Care Tax Credit, made possible by the new federal Affordable Care Act (ACA).

For those who haven’t yet done so, small business owners still have until October 17 to file for this tax credit, one that could mean substantial savings for those companies that meet the qualifications and provided healthcare insurance to its employees in 2010.

This new credit is for up to 35% of the health insurance premium costs that a for-profit small business incurred for insuring its employees in 2010, and it will increase to 50% by 2014.  For tax-exempt (non-profit) business, the credit is for 25%, increasing to 35% by 2014.

At a time when small businesses continue to struggle in an uncertain economy and marketplace, this could bring some welcome news for this year’s tax returns.

In order to qualify, a business must:

  • Have 25 or fewer full-time employees on the payroll earning an average annual salary of $50,000 or less (or the accounting equivalent, meaning a business with up to 50 half-time workers all earning less than $25,000 would qualify), and;
  • Provide healthcare coverage for its workers, and must contribute at least 50 percent of the cost of the employee coverage;

What’s more, for those eligible small businesses that do not yet provide insurance, if they do start providing coverage in the future, the credit can be claimed for 2011 and beyond.  Additionally, small businesses that have already filed without claiming the credit can still do so – they simply need to amend their returns using Form 1120X for corporations or Form 1040X for other small businesses.  Those eligible tax-exempt organizations should claim the credit on Form 990-T.

Again, many small businesses have struggled during these past two years of economic uncertainty, and escalating healthcare costs have, without a question, been one of the reasons for those struggles.  While this ACA Small Business Health Care Tax Credit is not necessarily a cure-all for these businesses, it certainly can help these owners to keep more of their hard-earned money in their pockets, both this year and well into the future.

Those in need of more information regarding this significant new credit should contact a tax professional to ask about it, and can also find valuable information on the Internal Revenue Service’s website at,,id=220809,00.html.

Andrew S. Lattimer, CPA, is a partner with BlumShapiro, the largest regional accounting, tax and business consulting firm based in New England, with offices in West Hartford and Shelton, CT and Rockland, MA.  The firm serves as business advisors for today’s leading companies, non-profit organizations and government entities, working to strategically tailor and consistently deliver tested solutions for unlocking an organization’s full potential.  For more information about BlumShapiro, visit


Advisors | Auditors | Consultants | CPAs - Blum Shapiro is one of the premier public accounting firms in the northeast and a Top 100 CPA Firm in the U.S. Our professionals serve businesses, individuals and organizations in Boston (MA), Hartford (CT), Cranston (RI), Shelton (CT) ,Quincy (MA) and Newton (MA) with audit, tax and business consulting services. Our firm has developed practice areas in automotive, construction, education, government, healthcare, hospitality, manufacturing, nonprofit organizations and professional service firms. New Haven CT, Fairfield CT, Norwalk CT, Waterbury CT.