New Health Care Tax Credit Form

The IRS has created Form 8941, Credit for Small Employer Health Insurance Premiums and instructiosn.  To see a draft of the form, visit www.irs.gov and type “Form 8941” in the search box.  Employers will file the 8941 with their tax returns and claim the credit as part of their general business tax credit. 

For 2010, small firms contributing at least half the cost of employees’ single coverage (ie, need not be family coverage) can claim the credit. 

Maximum credit, tax years 2010-2013:  35% of premiums paid by eligible small businesses and 25% of premiums paid by eligible tax-exempts.

Maximum credit, tax year 2014:  50% of premiums paid by eligible small firms, 35% by eligible tax-exempts. 

The maximum goes to employers with 10 or fewer full-time equivalent (FTE) employees earning annual average wages of $25,000 or less.  The credit phases out as the number of FTEs or average wages rise.  There is no credit for employers with 25 or more FTEs or average annual wages of $50,000 or more.  However, because eligibility is based partly on the number of FTEs (not just the number of employees), firms that have part-timers may qualify even if they employ more than 25 workers.