The new tax credit is available to small employers that pay at least half the cost of single coverage for their employees.
The maximum credit is 35% of premiums paid in 2010 by eligible small business employers and 25% of premiums paid by eligible employers that are tax exempt organizations. In 2014, the maximum will increase to 50% of premiums paid by eligible small business employers and 35% of premiums paid by eligible employers that are tax exempt organizations.
It is generally available to employers that have fewer than 25 full-time equivalent (FTE) employees paying wages averaging less than $50,000 per employee per year. Because the eligibility formula is based, in part, on the number of FTE, not the number of employees, many businesses will qualify even if they employ more than 25 individual workers.
The maximum credit goes to smaller employers - those with ten or fewer FTEs paying annual average wages of $25,000 or less.
Eligible small businesses can claim the credit as part of the general business credit starting with 2010 income tax return. For tax-exempt employers, the IRS will provide further information on how to claim the credit.
The IRS will use postcards to reach out to millions of small businesses that may qualify for the credit. The postcards will encourage small business owners to take advantage of the credit if they qualify.