IRS Releases Health Coverage Tax Credit Guidance

May 17, 2010 ( – Small-sized business owners not clear about their eligibility for the government’s new health care tax credit are getting some help from the Internal Revenue Service (IRS).

Notice 2010-44 provides detailed guidelines, illustrated by more than a dozen examples, to help small-sized employers determine whether they qualify for the credit and to estimate the amount of credit they could receive. The credit is designed to encourage small employers to offer health insurance coverage for the first time or maintain employee coverage they already have, the IRS said.

The guidance makes clear that small businesses receiving state health care tax credits may still qualify for the full federal tax credit. Additionally, the guidance said small businesses can receive the credit not only for regular health insurance but also for add-on dental and vision coverage.

In general, the credit is available to small employers that pay at least half the cost of single coverage for their employees in 2010. The credit is specifically targeted to help small businesses and tax-exempt organizations that primarily employ moderate- and lower-income workers.

For tax years 2010 to 2013, the maximum credit is 35% of premiums paid by eligible small business employers and 25% of premiums paid by eligible employers that are tax-exempt organizations.

More information about the credit, including a step-by-step guide and a list of frequently asked questions is available here. IRS Notice 2010-44 is here.