Can I Get Business Tax Credits for Paying Health Insurance Premiums for Employees?

If you are a restaurant owner with fewer than 25 full-time equivalent (FTE) employees, and you contribute to their health insurance premiums, you may be able to receive the Small Business Health Care Tax Credit.

Who Qualifies?
The credit is part of the Patient Protection and Affordable Care Act. It is designed to help small businesses offer or maintain health insurance coverage for moderate and lower income workers.

Here is a simple process to determine if the credit applies to your restaurant.
Step 1: You must pay at least half of the health insurance premiums for your employees.
Step 2: If you have part-time employees, determine their FTE by adding up the total number of hours they worked in the past year and dividing this by 2,080. Then add that to the number of full-time employees you have who work at least 40 hours a week. (You can’t count owners and family members in this calculation.) If the number is below 25, keep going.
Step 3: Take the total amount of annual wages paid and divide this by the Step 2 figure. This number needs to be lower than $50,000.

How Much Is the Credit and When Does It Apply?
The credit is worth up to 35 percent of your premium costs in 2010, and this continues through 2013. On January 1, 2014, the rate increases to 50 percent—but you must purchase your coverage on an exchange starting that year to qualify.

The credit is phased out gradually for companies that have average wages between $25,000 and $50,000 and for those who have between 10 and 25 FTE workers. In other words, restaurants who receive the highest credits would be those with nine employees who make less than $25,000 a year.

For example, let’s say you had 40 half-time employees in 2010—which is a 20 FTE. The total annual wages you paid were $500,000, or $25,000 per full-time worker. Your employee health care costs were $240,000. You would be eligible for a $28,000 tax credit for 2010 and $40,000 in 2014.

How Do I Get the Credit?
This is part of the general business credit on your income tax return. To ensure you receive it, and to determine the amount of your credit, you (and your tax accountant) need to complete the new one-page Form 8941: Credit for Small Employer Health Insurance Premiums. You may find the form at http://www.irs.gov/pub/irs-pdf/f8941.pdf.

Health Care Education Resources for Restaurants
The National Restaurant Association along with the Florida Restaurant and Lodging Association are committed to helping you get the facts about health reform as new rules are defined and implemented. Please visit the NRA Health Care Knowledge Center at www.restaurant.org/healthcare to stay informed on other changes as they occur.

In addition, UnitedHealthcare, the National Restaurant Association, and FRLA have created the Health Insurance Options Center. If you would like individualized assistance with evaluating your options for health insurance, speak to our dedicated restaurant team.
You should also consult with your own tax advisor in order to assure compliance with the complex requirements of this provision.

Information provided courtesy of UnitedHealthcare Insurance Company or its affiliates. Administrative services provided by United HealthCare Services, Inc., or their affiliates. The content provided is for informational purposes only. This communication is not intended, nor should it be construed, as legal or tax advice. Please contact a competent legal or tax professional for legal advice, tax treatment and restrictions. Federal and state laws and regulations are subject to change.