Tags: US | Health | Overhaul | Taxes

IRS Pitches Tax Credit for Health Insurance

Monday, 17 May 2010 06:53 AM

 

Pitching President Barack Obama's health care law to skeptical business owners, the IRS on Monday will announce ground rules for small firms wishing to claim a new federal tax credit for health insurance.

Created under the health overhaul law, the tax credit covers up to 35 percent of the premiums that certain small businesses pay on behalf of their workers. The IRS notice addresses unanswered questions about the benefit, which is available starting this year.

The agency's action comes days after the nation's largest small business lobbying group announced it was joining a lawsuit challenging the health care law. The National Federation of Independent Business argues that Congress overstepped its constitutional authority by imposing a requirement that most Americans obtain health insurance either through an employer, a government program or buying it directly.

The IRS notice clarifies that employers can apply the credit toward dental and vision benefits, not just medical coverage. A fact sheet released by the Treasury Department also says that employers can claim the federal benefit even if they receive state tax credits for their insurance premiums.

The White House estimates up to 4 million small businesses may qualify for the tax credit, but it's not clear how many will be eligible. To begin with, they have to provide health insurance — and many small employers don't. To qualify, companies must pay at least 50 percent of their workers' premiums.

Eligibility is also limited by company size and wages. A firm has to have fewer than 25 full-time workers averaging less than $50,000 a year in pay.

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