The Small Business Health Care Tax Credit helps small businesses and small tax- exempt organizations afford the cost of covering their employees.

Received a Postcard from the IRS?

Millions of small employers will receive postcards from the IRS beginning the week of April 19 that alert them to the new Small Business Health Care Tax Credit and encourage them to check their eligibility. Even if you don't receive a postcard, your business still may be eligible. Read more about this effort.

Eligibility Rules

• Providing health care coverage. A qualifying employer must cover at least 50 percent of the cost of health care coverage for some of its workers based on the single rate.
• Firm size. A qualifying employer must have less than the equivalent of 25 full-time workers (for example, an employer with fewer than 50 half-time workers may be eligible).
• Average annual wage. A qualifying employer must pay average annual wages below $50,000.
• Both taxable (for profit) and tax-exempt firms qualify.

Amount of Credit

• Maximum Amount. The credit is worth up to 35 percent of a small business' premium costs in 2010. On Jan. 1, 2014, this rate increases to 50 percent (35 percent for tax-exempt employers).
• Phase-out. The credit phases out gradually for firms with average wages between $25,000 and $50,000 and for firms with the equivalent of between 10 and 25 full-time workers.

Three Simple Steps for Employers to Qualify

To determine if your small business or tax exempt organization qualifies for the Small Business Health Care Tax Credit, follow the three simple steps on our fact sheet.

Examples

Scenarios illustrate how the credit applies to employers in different circumstances.

Questions and Answers

Need more detailed information? We have answers.

YouTube Primer on Health Care Credit

This new video explains the who, what, why and how of the Small Business Health Care Tax Credit.

For More Information

New guidance makes it easier for small businesses to determine whether they're eligible for the new health care tax credit under the Affordable Care Act and how large a credit they'll receive

Related Items:

• Flyer on the Small Business Health Care Tax Credit for small employers
• Affordable Care Act of 2010: News Releases, Multimedia and Legal Guidance
• Affordable Care Act Tax Provisions

Today, the Treasury Department is releasing more details on the ways small businesses will benefit from health insurance reform. Rising health care costs have been the biggest concern for small businesses for decades. But as a result of the Affordable Care Act, we are already putting in motion steps that will reform the health insurance system so it works for small businesses, rather than strap them with continually rising costs.

One of the many ways the new law is helping small businesses is through tax credits starting this year. These credits will help small business owners provide health insurance to their workers – by giving back up to 35 percent of the employee premiums they pay starting this year. Just as important, today’s announcement made clear that small businesses may receive state health care tax credits and still qualify for a federal tax credit. In addition, today’s announcement clarifies that dental and vision coverage qualify for the credit.

With this announcement today, I’m reminded of a woman small business owner I met in New Jersey last summer. She said to me that the day she was able to provide health insurance for her staff was the day she knew she was a success. But rising costs forced her to cut back on the coverage and even put her at risk of not being able to provide coverage at all for her employees. That’s why these tax credits are so important. It will mean she and countless other small business owners across the country can do what she thinks is best for her employees and for her business.

An estimated 4 million small businesses may qualify for a credit, which will provide about $40 billion in tax relief over the next 10 years. Already, the IRS has sent out millions of postcards to small business owners connecting them with tools to help them to determine their eligibility for a federal tax credits this year.

In 2014, the maximum tax credit will increase from 35 to 50 percent and small business owners will also have the chance to access affordable plans through health insurance exchanges. These exchanges will be a marketplace where small businesses can pool their risk together and spread it more broadly, while reducing their administrative costs.

It’s important to note that the Affordable Care Act also will help small businesses in other ways.

For example, rules will prohibit insurance companies from dramatically increasing premiums for a small business just because one worker gets sick. Also, by outlawing discrimination based on pre-existing conditions, the Affordable Care Act will make it easier for small businesses to compete for quality workers, as well as allow more Americans to break out of “job lock” and start their own business. Read more benefits of the Affordable Care Act for small businesses here.

Overall, the Affordable Care Act will provide entrepreneurs and small business owners with lower costs and more tools to provide health insurance for their employees, whom they often think of as members of their own family. We owe them nothing less as they work to grow, create jobs, and lead us toward full economic recovery.

By Donna Smith and Kim Dixon Donna Smith And Kim Dixon – Thu Jul 30, 7:45 pm ET

WASHINGTON (Reuters) – President Barack Obama's drive for U. S. healthcare reform suffered another setback on Thursday when Senate Finance Committee leaders said the panel would not vote on a compromise plan before senators leave for a month-long August recess next week. Committee Chairman Max Baucus said there had not been sufficient progress to complete the healthcare bill by the end of next week but talks between three Democrats and three Republicans on the panel would continue. "It is clear there will not be a markup next week," Baucus told reporters after another in a long series of closed-door sessions between the committee's six negotiators. With polls showing public support for Obama's healthcare reform plans waning, the Senate delay was another dose of bad news for his hopes to gain approval for a bill that will lower healthcare costs and expand coverage to the uninsured. "The bill is not ready for prime time," Republican Senator Michael Enzi, one of the party's three negotiators, told reporters. The delay could increase pressure on Baucus and Senate Democratic leaders to jettison the bipartisan talks and move forward without Republican support. "We are committed to finding a bipartisan solution as expeditiously as possible," Baucus said after acknowledging there would not be a panel vote until September. Senator Charles Grassley, the ranking Republican on the panel, told reporters: "We have not been committed to deadlines, we are committed to getting the job done. "In the House of Representatives, the Energy and Commerce Committee -- the last of three House panels to vote on healthcare reform -- began debate after striking a deal with conservative Democrats. The panel spent much of Thursday wading through dozens of amendments to the measure. Final approval could come Friday.

COMMON GROUND

"There's plenty of common ground as we go forward on this," House Speaker Nancy Pelosi told reporters. "At the end of the day we have to have universal, quality affordable healthcare for all Americans. And we will do that. "The healthcare overhaul, Obama's top legislative priority in his first year, has been besieged by criticism about its cost and scope. Obama has stepped up his lobbying for passage of a measure to rein in costs, improve care and cover most of the 46 million uninsured Americans. But as congressional discussions drag on, more Americans are voicing doubt over the reform plan, with many worried that a costly overhaul could reduce the quality of their care and limit choices of doctors. A New York Times/CBS News poll showed 69 percent of Americans were concerned their care would suffer if they were on a government-run plan. And a Wall Street Journal/NBC News poll showed 42 percent of those surveyed in July thought Obama's healthcare plan was a bad idea, up from 32 percent in June. "Right now we're focused on moving this process forward," said White House spokesman Robert Gibbs. "There is a lot of twists and turns left in all of this. We're trying to get the process going. "The White House and leaders of the Democratic-controlled Congress had hoped the final committees considering the measure in each chamber -- the House Energy and Senate Finance panels -- could complete deliberations before the August recess. Among the amendments passed by the House panel was a provision that there would be no waiting period for insurance coverage under the federal Children's Health Insurance Program if a child under age 2 loses health coverage through a group plan or a parent's employer. Another amendment prohibits the use of comparative research on the effectiveness of treatments to deny or ration care. In the Senate, the Finance Committee negotiations have focused on a plan that would use non-profit cooperatives to compete with private insurers to help drive down costs. A government-run insurance program, favored by Obama and many of his fellow Democrats but resisted by Republicans and the insurance industry, would not pass the Senate, Democrat Kent Conrad, one of the panel negotiators, told the NPR radio network.But a coalition of liberal House Democrats said it would oppose any final version of a House bill that did not include a "robust" public insurance option.The White House did not comment on whether it would support a bill without a public option but said any measure would have to increase competition for insurers."The president is not interested in and doesn't believe we'll have healthcare reform unless we have elements that provide ample choice and competition for people that are in an insurance market," Gibbs said.Pelosi said the insurance industry, which has spent millions lobbying Congress over the issue , were villains in the debate. "It's almost immoral what they are doing," she told reporters. "They are the villains. They have been part of the problem in a major way."

Under the two-year economic stimulus package released last week by House Democrats, recently laid-off workers could receive health coverage assistance through an $8.6 billion expansion in Medicaid or $30 billion in federal COBRA subsidies, the Washington Post reports. House leaders said that under the COBRA proposal, health insurance premiums would be subsidized up to 65% for one year for recently laid-off workers. According to legislative sources, the level of assistance could change depending on the results of congressional budget analyses, the Post reports.

President Obama on Tuesday during a prime-time news conference linked issues within the U.S. budget in part to high health care costs, stating that "almost every single person" who has examined the nation's budget has concluded that the government must find a way to reduce health care costs, the Washington Post reports. Obama said, "It's going to be an impossible task to balance our budget if we are not tackling rising health care costs". Obama said that policymakers will not be able to control rising health care costs in the near future. He said, "We're not going to be able to do it this year or next year or three years from now"

Electronic health records are still rare in US hospitals as a national survey reveals that under 2 per cent have installed comprehensive electronic health records in all departments, with many giving the high cost of capital investment and maintenance as the primary barriers to adoption. The survey authors suggest a focused policy strategy that targets money, interoperability and staff training could spur wider adoption. The 19 billion dollars in the stimulus bill is really just a down payment for getting us to a healthcare system that is fully electronic and can deliver the kind of care Americans deserve. The reason for the study, as the authors outline in their background information, is that despite a consensus that health information technology should lead to safer, better health care, the data is still considered little reliable. A lot of work still needs to be done.