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Health care industry

Small Businesses to Receive Tax Credits for Health Insurance Premiums under Affordable Care Act

Strategic Insights

— 1 min read

Small businesses across the country, including those in Hawaii, are set to receive tax credits under the Patient Protection and Affordable Care Act to help with their health insurance premiums. According to estimates, approximately 3.6 million small businesses nationwide, including 28,700 in Hawaii, will be eligible for the tax credit in 2010. This will provide an estimated $40 billion in assistance to small businesses over 10 years to make health insurance coverage more affordable. The tax credit is worth up to 35 percent of a small business's healthcare premium costs in 2010, increasing to 50 percent in 2014.

Key Takeaways:

  • The Patient Protection and Affordable Care Act provides a new federal tax credit for certain small businesses that provide health coverage for their employees.
  • An estimated 3.6 million small businesses nationwide, including 28,700 in Hawaii, will be eligible for the tax credit in 2010.
  • The tax credit will provide an estimated $40 billion in assistance to small businesses over 10 years to help make health insurance coverage more affordable.
  • To be eligible for the tax credit, firms must have fewer than 25 full-time equivalent (FTE) employees and pay wages averaging less than $50,000 per employee per year.
  • The maximum benefit goes to firms with 10 or fewer FTE employees with an average of wages of $25,000 or less.
  • Non-profit organizations are also eligible for a 25 percent tax credit in 2010, increasing to 35 percent in 2014.
  • Firms can claim the credit for 2010 through 2013 and for any two years after that.

Statistics:

  • 97 percent of the state's employers are small businesses.
  • 56 percent of the state's nonfarm private-sector employment comes from small businesses.
  • It is estimated that 3.6 million small businesses nationwide will qualify for the tax credit in 2010.
  • 28,700 small businesses in Hawaii are expected to be eligible for the tax credit in 2010.
  • The tax credit will provide an estimated $40 billion in assistance to small businesses over 10 years.
  • The maximum benefit goes to firms with 10 or fewer FTE employees with an average of wages of $25,000 or less.
  • The credit is worth up to 35 percent of a small business's healthcare premium costs in 2010, increasing to 50 percent in 2014.

Sources:

  • Office of Hawaii Rep. Mazie Hirono
  • Patient Protection and Affordable Care Act (Public Law: 111-148)
  • Internal Revenue Service (IRS) news release

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