Developments in Tax and Business

Small Business Health Insurance Credit

The new health care reform law offers a tax credit to small businesses that provide health care insurance coverage to their employees. The new law allows a small business to claim a federal tax credit of up to 35% of the amount the business spends on health insurance for its workers. The rules are complex, but for a business to qualify for the tax credit, it must have no more than the equivalent of 25 full-time employees and pay them average annual wages of $50,000 or less. The employer must contribute at least 50% of the total premium cost. Business owners and family members aren’t considered employees for credit purposes, and premiums paid on their behalf aren’t eligible for the credit. A family member is defined as a child (or a descendant of a child), a sibling or stepsibling, a parent (or ancestor of a parent), a stepparent, a niece or nephew, an aunt or uncle, a son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law.

Small Businesses and Job Creation

Firms with fewer than 500 employees accounted for 64% (or 14.5 million) of the 22.5 million net new jobs generated between 1993 and the third quarter of 2008, according to data from the U.S. Department of Labor, Bureau of Labor Statistics.