If your small business offers health insurance benefits to your employees you may be able to claim a large tax credit on your 2013 income taxes.  Your company must meet the following criteria to be eligible:

  • Less than 25 full-time employees (or full -time equivalent)
  • Average annual wages of less than $50,000
  • Company pays at least 50% of insurance premiums (for the employee only)

If you have several part-time employees you can determine how many full- time equivalent employees you have by adding up the hours worked by all part-time employees last year. Then divide by 2080. So, if you have four employees that worked a total of 4160 hours last year and divide by 2080 you will come up with two full-time equivalent employees.

To determine average annual wages simply add up total wages and divide by the number of employees. All owners’ wages should be excluded from the calculation.

The credit is up to 35% depending on average wages and number of employees. The rest of the company premium contributions can be deducted as a business expense.

Beginning in 2014, the credit will increase to 50%, but it will only be available for employers that purchase insurance through the Small Business Health Options Program Marketplace. If you offer another insurance plan the credit will no longer apply, but you can apply this year’s tax credit to other tax years.  For more information visit irs.gov.

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