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35% Health Care Tax Credit is a sham

January 22, 2011

35% Health Care Tax Credit is a sham
by Greg Galdabini
By U.S. Chamber of Commerce

The House was smart to pass legislation this week repealing the health care reform law enacted last year. The law is so flawed and complex that even a provision as seemingly beneficial to small businesses as the 35% tax credit for the purchase of employee health care has turned out to be major disappointment to some.

Here’s an excerpt from an article that reports on the experience of Alex Bryant, owner of Weld Direct Corporation in Florida:

Bryant employs 17 workers at an average salary of $41,000 a year; he spends a lot on health insurance.

“We spend close to $90,000 so I was looking for a sizeable tax credit to use in my 2010 taxes,” said Bryant.

However, “between the two deductibles, I end up with absolutely zero. Zero, Zero credit.”

Here’s more:

Thirty-five percent is the maximum credit, explained Mark Patrick, an accountant. “There are phase-outs above certain levels and certain payroll levels,” he said. “It is a challenging time for the small business.”

Patrick, a C.P.A. for Patrick and Robinson, does not work with Weld but blogs about the health care tax credit and advises small businesses.

He said if a business has more than 10 workers, the credit is reduced 1/15th of a percent per worker up to 25 workers, and for every worker who earns more than $25,000 the credit is reduced another 1/25th of a percent. Those are the phase outs, he said.

“The employers who have done some calculations are disappointed, it is either no credit or a small credit.”

Regardless of whether the tax credit is helpful to small businesses, it disappears two years after state health care exchanges are set up (in 2014). For businesses that benefit from the tax credit, what then?

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Lawanda Bridges February 2, 2011

.. Update Dec 2010 The IRS has final guidance for small employers eligible to claim the new small business health care tax credit for the 2010 tax year. The IRS have also provide a one-page form and instructions for small employers to use for claiming the credit for the 2010 tax year..New Form 8941 Credit for Small Employer Health Insurance Premiums and newly revised Form 990-T are now available on The IRS also posted on its website the instructions to Form 8941 and Notice 2010-82 both of which are designed to help small employers correctly figure and claim the credit..Included in the Affordable Care Act enacted in March see details in previous update below the small business health care tax credit is designed to encourage both small businesses and small tax-exempt organizations to offer health insurance coverage to their employees for the first time or maintain coverage they already have..The new guidance addresses small business questions about which firms qualify for the credit by clarifying that a broad range of employers meet the eligibility requirements including religious institutions that provide coverage through denominational organizations small employers that cover their workers through insured multiemployer health and welfare plans and employers that subsidize their employees health care costs through a broad range of contribution arrangements..In general the credit is available to small employers that pay at least half of the premiums for single health insurance coverage for their employees. It is specifically targeted to help small businesses and tax-exempt organizations that primarily employ moderate- and lower-income workers..Small businesses can claim the credit for 2010 through 2013 and for any two years after that. For tax years 2010 to 2013 the maximum credit is 35 percent of premiums paid by eligible small businesses and 25 percent of premiums paid by eligible tax-exempt organizations.

Deborah Lee May 4, 2013

In every income we have to pay tax which helps government to circulate that money for the development of the country and people. Therefore at every regular interval we have witnessed a tax increase in every section which leads to tax credit scam. Here we have found that tax on health care increases day by day but still the collective money are not even spend in public welfare.

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