First Coast News: Health Care Tax Credit Leaves Small Business Owner Disappointed
Jan 19, 2011 -
By Ken Amaro; First Coast News
Alex Bryant owns Weld Direct Corporation and was counting on a new federal tax credit to ease his ever-rising health insurance costs.
But Bryant said while he thought the 35 percent tax credit would help, when he started investigating the benefits, the results surprised him.
Bryant employs 17 workers at an average salary of $41,000 a year; he spends a lot on health insurance.
"We spend close to $90,000 so I was looking for a sizeable tax credit to use in my 2010 taxes," said Bryant.
However, "between the two deductibles, I end up with absolutely zero. Zero, Zero credit."
To be eligible, the small business must have no more than 25 employees and their average salary can be no more than $50,000. Byrant's company falls within the guidelines, so what happened?
Thirty-five percent is the maximum credit, explained Mark Patrick, an accountant. "There are phase-outs above certain levels and certain payroll levels," he said. "It is a challenging time for the small business."
Patrick, a C.P.A. for Patrick and Robinson, does not work with Weld but blogs about the health care tax credit and advises small businesses.
He said if a business has more than 10 workers, the credit is reduced 1/15th of a percent per worker up to 25 workers, and for every worker who earns more than $25,000 the credit is reduced another 1/25th of a percent. Those are the phase outs, he said.
"The employers who have done some calculations are disappointed, it is either no credit or a small credit."
Some small businesses will benefit from the tax credit, but "it is going to be a small group that will qualify," he said.
Bryant will not be one of them. "I am disappointed when they push things through without the full story," he said.
Patrick said the company with just 10 employees and an average salary of $25,000 will be the one that benefits the most from the 35 percent health care tax credit - even so they will most likely need a CPA to file.
The credit is also available to nonprofits, with a cap of 25 percent. The credit expires in 2014.