27 Oct 2010

Small business heath care tax credit: a mirage?

27 Oct 2010

One of the provisions of the Patient Protection and Affordable Care Act (PPACA) initially looked like it could be a huge boon to small businesses: a tax credit for dollars spent on employee health care.  Kaiser Health News has a very good summary of the tax credit, here.

We wrote about this back in April; six months later, as we talk to clients throughout the Bay Area and California, most small businesses do not qualify.  We attribute this primarily to the high cost of living in California’s urban areas, and because the tax credit phases out based on two criteria: number of employees over 10, and average salary over $25,000 annually.  Combine those two and we are finding that our clients either do not qualify at all, or the credit is so small so as not to be worth the effort of applying for it.

A factor that often gets missed is that the average salary criterion is measured by FTE – Full Time Equivalent, not just average annual salary.  So, your 30-hour/week, $40,000/year employee in fact does not fall within the threshold.

Still, there are a few small businesses that may qualify, so we encourage you to use the easy online calculator from the Small Business Majority.  Please contact us if you aren’t sure if you qualify.

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