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Small businesses seeking tax credits to offset costs of providing health insurance
The Wichita Business Journal
July 30, 2010

Greg Hephner pays $3,300 a month to provide complete health insurance coverage for his 13 employees at Hephner TV & Electronics Inc.

It's challenging, small business owners say, to pay for a portion of health insurance premiums - let alone the entire bill. Still, some businesses find ways to provide that benefit for their employees.

That's why local small businesses are interested in federal tax credits, made available through the health care reform law, to help offset a portion of the cost of insurance.

"That would be a definite help to us to deduct some of those costs back out," says Hephner, president of Hephner TV.

Hephner says his company started looking into the benefits of the tax credits when its fiscal year ended in June.

"It's frankly the one thing about the health care bill that I like," Hephner says.

Small business tax credits were among the topics discussed Tuesday during the Wichita Business Journal's health care reform panel at the Hyatt Regency Wichita.

Clinton Baker, manager of the general practice group at Kennedy and Coe LLC and a member of the WBJ panel, says businesses that provide health insurance for their employees are the ones that are most interested in the federal tax credit.

Those that don't, Baker says, are concerned that the credits won't provide enough incentive for them to offer insurance.

The tax credits are designed to provide more immediate relief to businesses.

Offsetting costs

The credits are available this year to small employers that pay at least half of the cost of single insurance coverage for their employees. The credit targets small businesses and tax-exempt organizations that employ low- and moderate-income workers.

Businesses can claim the credit starting with the 2010 income tax return they will file for 2011. There is no additional application process, Baker says.

About 89 percent of Kansas small businesses with fewer than 25 employees will be eligible this year for the tax credit, according to a recent report by consumer health organization Families USA.

In April, the IRS notified more than 50,000 Kansas small businesses that they might be eligible for the tax credit.

From now until 2013, small businesses are eligible for up to a 35 percent credit, and tax-exempt entities can get a 25-percent credit.

For this provision, a small business is defined as having 25 or fewer employees and average annual wages of less than $50,000 per employee. Businesses with 10 or fewer employees and annual average wages of less than $25,000 are eligible for the full 35 percent credit.

Business credits increase to 50 percent in 2014.

Showing interest

Tuesday's panel included discussion about small business tax credits, but specific companies were not mentioned.

In separate interviews, small businesses say they are interested in the credit.

Diane Wynn, president of Acumen Business Connections Inc., which provides electronic payment processing for businesses, says the federal tax credit would help her offset the $700 a month she pays toward three employees' health insurance plans. The company's other three employees have opted out of its insurance plan, Wynn says.

"We will actively pursue the tax credits," Wynn says. "That's not a huge sum, but it's all relative."

Roth Heating and Air Conditioning Inc. also is interested in the federal tax credit, says co-owner Bev Cole. She says the company pays $3,100 a month toward health insurance. Eleven of the company's 25 employees participate in its insurance plan.

Federal tax credits for health insurance
Credits: Used to help small businesses offset the costs of providing health insurance coverage for employees.
Starts: Tax year 2010 (Businesses can claim the credit starting with the 2010 income tax return they will file for 2011).
Amount:
Up to 35 percent of insurance costs for employers with 25 or fewer full-time workers and with average wages less than $50,000. The credit increases to 50 percent in 2014.

 

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