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2010 Tax Countdown – Small Business (and Household Employer!) Healthcare Tax Credit Effective for 2010 through 2013


Small business owners and household employers (as in Nanny)– listen up! And watch a YouTube from our buddies at the IRS The Affordable Care Act of 2010 passed earlier this year may offer some financial relief for you IF you provide health insurance for your employees.

Here is the skinny on qualifying for the credit:

  • Employ 25 or fewer full time employees (or full time equivalents) not including owners
  • Pay wages on average of less than $50,000 per employee not including owners
  • Provide health insurance and pay at least 50% of the employee’s single-rate premium

That is the easy part. Like any new tax law, it quickly gets difficult and murky, especially in the finer definitions of the three things mentioned above—it seems so straight forward, but, alas, it is not. The IRS has, however, attempted to answer most questions (see FAQs at,,id=220839,00.html ).

Suffice to say here that your business/household may qualify for a credit up to 35% of the health insurance premiums you pay on behalf of your employees. That could be a chunk of change. But the operative term there is “up to” – only relatively small employers who pay low wages will max the credit. But it is still worth investigating with your CPA soon. The credit is retroactive to January 1, 2010. And since it is based on full time equivalents, your company may qualify even if it hires more than 25 part timers. Family members and owners are generally not considered employees for calculating the credit. There are also several transition rules that make it easier for employers to qualify in 2010.

Note – the credit (which is payment of tax, as in money) will reduce your company’s health insurance deduction (which lowers your taxable income and thus ratably reduces your tax). It is usually better to get a credit than a deduction. To give a shot at calculating the credit, try And for potential information overload (but good stuff):

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