Did you know that the health reform legislation signed by President Obama includes a Small Business Health Care Tax Credit?  This credit is designed to assist small businesses with the cost of covering their employees.

If you are a small employer here on the U.S. Virgin Islands with less than 25 full-time equivalent employees, pay an average wage of less than $50,000 a year, and pay at least half of employee health insurance premiums, then this tax credit may help your company.

Here are some important facts about the Small Business Health Care Tax Credit:

  • It’s effective immediately;
  • It covers up to 35% of premiums that a small business pays to cover workers (50% in 2014); and
  • Small for-profit businesses and non-profit organizations are eligible (Tax-exempt organizations are eligible for a 25%. In 2014, it will be 35%).

So, if you pay $50,000 annually for your employees’ health care premiums, and you qualify for a 15% credit, you would save $7,500!

The Council of Economic Advisors estimates that 4 million small businesses are eligible for the credit if they provide health care to their workers. The amount of the credit you receive is based on a sliding scale. The smaller the business or charity, the larger the credit. 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.  

If you are a small tax-exempt employers, the credit is refundable. As a result, if your organization doesn’t have taxable income, you still may be eligible to receive the credit as a refund, provided it doesn’t exceed your income tax withholding and Medicare tax liability.  

One last thing: if you qualify for the credit but didn’t claim it on your tax return, you can still file an amended return. Also, you may be able to carry the credit forward.  

If you need assistance determining if your small business or tax exempt organization qualifies for the credit or any other corporate tax and business matters, contact a memer of the legal team at BoltNagi PC, an experienced law firm in the United States Virgin Islands providing quality legal services for value.