Small Business Health Care Tax Credit Available to Tax-Exempt Organizations

Date: August 5, 2010

If you are a small tax-exempt organization that provides health insurance coverage to your employees, you may qualify for the Small Business Health Care Tax Credit. This new tax credit is designed to help small employers, including tax-exempt organizations, afford the cost of health insurance coverage for their employees. The credit is primarily directed to employers with employees of low to moderate income.

In order to be eligible for the tax credit, the employer must pay at least fifty percent of the health care coverage cost for its employees based on the single individual rate. The employer must also have fewer than the equivalent of twenty-five full-time employees. Finally, the employer must pay average annual wages below $50,000.

The maximum tax credit available for tax-exempt employers in 2010 is twenty-five percent of the employer's health insurance premium cost. For tax-exempt employers, the amount of the credit cannot exceed the total amount of income taxes and Medicare taxes that the employer is required to withhold from its employees' wages for the year, plus the employer's share of Medicare taxes on its employees' wages for the year. The credit gradually phases out for all employers with average wages between $25,000 and $50,000 and for employers with the equivalent of between ten and twenty-five full-time employees.