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Jean   Murray

Calculating Your Health Care Tax Credit - IRS Issues Draft Form

By September 9, 2010

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To help you calculate your tax credit under the Health Care Act (the "Affordable Care Act"), the IRS has released a draft of Form 8941 which is a calculation checklist.  This is just a draft form, but you can use it to see what information is required and the amount of your potential tax credit. The final version of Form 8941 will be available later this year.

Some Points to Note about the Health Care Tax Credit

1. You will use this calculation to take the tax credit on your 2010 business taxes, so you will be filing this form with your business tax return in 2011.

2. The IRS says: In 2010, the credit is generally available to small employers that contribute an amount equivalent to at least half the cost of single coverage towards buying health insurance for their employees. The credit is specifically targeted to help small businesses and tax-exempt organizations that primarily employ moderate- and lower-income workers.

3. For tax years 2010 to 2013, the maximum credit is 35 percent of premiums paid by eligible small business employers and 25 percent of premiums paid by eligible employers that are tax-exempt organizations. Beginning in 2014, the maximum tax credit will go up to 50 percent of premiums paid by eligible small business employers and 35 percent of premiums paid by eligible, tax-exempt organizations for two years.  The maximum credit goes to smaller employers -- those with 10 or fewer full-time equivalent (FTE) employees --paying annual average wages of $25,000 or less.

4. Your business is not eligible for the health care tax credit if you employ 25 or more FTE employees or if you pay average wages of $50,000 a year or more. Even if you employ more than 25 individuals, you may still qualify for the tax credit if you have part-time employees; check out this article on how to calculate FTEs to see if you still qualify).

For More Information on the Health Care Tax Credit

How the Affordable Care Act Will Affect Your Business (including the Health Care Tax Credit)

Visit the IRS Affordable Care Act Webpage


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