Expanding the Healthcare Tax Credit for Small Businesses

Ed. Note: This was originally posted on Open for Business, the U.S. Small Business Administration blog.  

Right now, small businesses across America pay an average of 18 percent more to provide health insurance than large businesses.  While the insurance exchanges included in the Affordable Care Act will bring these costs down starting in 2014, we need to make it easier for small business owners to provide insurance to their employees right now. One important part of President Obama’s Fiscal Year 2013 budget proposal expands a tax credit that does exactly that.

The Small Business Health Care Tax Credit has benefited hundreds of thousands of small businesses since the Affordable Care Act passed in 2010.  After listening to business owners around the country, the President is proposing to make the tax credit available to more businesses and easier to claim. The budget increases the maximum size of eligible companies from 25 employees to 50, proposes more generous phase-out provisions and simplifies the credit, making it easier to claim. It is estimated that if the President’s proposal were enacted, the tax credit will benefit about half a million employers who provide healthcare to 4 million workers in 2012 alone. Over the next decade, this proposal would provide an additional $14 billion in tax credits to small employers across the country.

These changes will help small business owners hire more employees and create an economy built to last. Take for example, Mark Hodesh, who owns Downtown Home and Garden in Ann Arbor, Michigan.  He started offering healthcare about 15 years ago to attract and retain talented employees so that he could compete with bigger stores and to help address skyrocketing healthcare costs his employees were facing. 

In 2010, after qualifying for the small business healthcare tax credit, he got back nearly $9,000, almost 30 percent of his costs, for offering coverage to 11 full-time employees. The money he saved helped him hire a new employee, and now, with 12 employees, his tax credit could be go up to about $10,000 if the President’s proposal to expand the tax credit is adopted by Congress. 

We know that Mark and most small business owners think of their employees like family and want to offer coverage. The small business health care tax credit helps make that possible -- and the improvements to the tax credit President Obama is proposing will increase the number of eligible small businesses and make the process of claiming the credit easier. 

The sooner the President’s plan is implemented, the sooner small business owners across the country can benefit.  For more information on the tax credit, go to obamawhitehouse.archives.gov, www.healthcare.gov and www.irs.gov, which all have special sections to answer questions and help small businesses figure out if they qualify for the credit.