Iowa’s small businesses can get tax credits to help pay for health care coverage

A new report finds more than 90 percent of Iowa's small businesses will be able to take advantage of tax credits to help pay for federally mandated health care coverage.

Families USA and Small Business Majority, a business advocacy group, issued a report Wednesday showing that 51,100 Iowa businesses with fewer than 25 workers and average wages of less than $50,000 will be eligible to receive a tax credit for the health insurance that they provide for their employees.

The value of the credit through 2014 is up to 35 percent of the employer's costs for employee coverage. The tax credit is one of the provisions of the federal Patient Protection and Affordable Care Act.

The report, “A Helping Hand for Small Businesses: Health Insurance Tax Credits,” also found that 14,000 Iowa small businesses will qualify for the maximum tax credit of 35 percent. These are businesses that employ 10 or fewer workers who earn an average wage of less than $25,000, and traditionally have the most difficult time affording health insurance coverage.

In 2008, employers with fewer than 10 workers had to pay, on average, nearly $350 more for each employee's health insurance than firms that employed 50 or more workers.

Nationally, 72 percent of small businesses with 10 to 25 workers offer health coverage, while more than 95 percent of businesses with 50 or more workers offer health insurance.

“Many small businesses, like the local diner, the hardware store down the street, or the neighborhood repair shop, face special challenges in providing health coverage for their small number of employees,” said Ron Pollack, executive director of Families USA in a conference call Wednesday with reporters. “They will now receive substantial help.”

Non-profit employers also will benefit, according to the Families USA/Small Business Majority report, with a maximum credit of 25 percent. As the number of employees and their average wages rise, the tax credit is reduced on a sliding scale.

The new federal health reform law also will allow employers to count two half-time workers as one full-time worker. That will permit an employer with mainly part-time employees, such as a fast-food restaurant, to qualify for the tax credit.

The full report on the health insurance tax credit program, “A Helping Hand for Small Businesses,” is available at:  :  

http://www.familiesusa.org/assets/pdfs/health-reform/Helping-Small-Businesses.pdf