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As the March 15 corporate tax filing deadline approaches, California’s small businesses need to know they may qualify for an important health care tax credit available under the Affordable Care Act.
“Right now the credit is underutilized,” Certified Public Account and tax expert Conrad Davis of Crowe Horwath said in an interview with CalChamber News. “The studies show that not as many businesses that are eligible are participating.”
A recent study by Small Business Majority found that more than 375,000 small businesses in California are eligible for health insurance tax credits for a total value of more than $1.8 billion.
According to the Internal Revenue Service (IRS), small employers that pay at least half of the premium for employee health insurance coverage may be eligible for the Small Business Health Care Tax Credit.
To qualify, an employer must have fewer than the equivalent of 25 full-time workers and have average annual wages below $50,000 and pay for fifty percent or more of employees’ health insurance premiums.
For the 2012 tax year, the IRS is offering a tax credit that is worth as much as 35 percent of a small business’ premium costs. In 2014, the credit increases to as much as 50 percent and must also be purchased through the state exchange, Covered California.
California Board of Equalization member George Runner calls this credit an important opportunity for businesses that form the economy’s backbone.
“To me, this is a great window that people ought to take advantage of,” Runner said.
The Small Business Health Care Tax Credit took effect immediately after the 2010 passage of the Affordable Care Act and small businesses can now claim the credit on their 2012 income tax return. Businesses that have already filed a tax return and later determine they are eligible for the credit can file an amended tax return starting with their 2010 return.
As the law takes shape, Davis said it’s vital for small businesses to consult their tax advisers about the benefit.
The Small Business Health Care Tax Credit is providing California small businesses one more avenue to maintain a healthy, productive workforce.
For more information on the tax credit and other benefits available under the health care law, go online at calrest.org/healthcare of HealthLawGuideforBusiness.org/taxcredits.