Does the Federal Government Owe You Tens of Thousands of Dollars? Claiming the Small Business Health Care Tax Credit

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On June 28, 2012, the Patient Protection Affordable Care Act ("ACA"), often referred to as "Obamacare," was declared constitutional by the United States Supreme Court. While most of the coverage of the ACA has focused on its mandates to purchase insurance and provide coverage for contraceptives, abortifacients and surgical sterilizations, many small tax exempt organizations, including churches, may be losing out on tens of thousands of dollars of savings per year by not taking advantage of a tax credit that was also included in the ACA. The small business health care tax credit (Tax Credit) is an incentive for small employers to provide health insurance coverage to their employees.

Effective for taxable years beginning in 2010, "qualified small employers," including tax-exempt organizations, may be eligible for the Tax Credit if they contribute a uniform percentage of at least 50% toward the cost of their employees' health insurance.1 For tax-exempt organizations, the Tax Credit can be up to 25% of premiums paid and will take the form of a refundable credit against the amounts the employer is required to withhold from its employees' wages for federal income taxes and Medicare tax, plus the employer share of Medicare taxes. The credit is also limited by these amounts.

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