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 tax-exempt organizations. In 2014, the maximum tax credit will go to 50% of premiums paid by eligible small business employers and 35% of premiums paid by eligible, tax-exempt organizations for two years. The maximum credit goes to smaller employers—with 10 or fewer fulltime employees—paying annual average wages of $25,000 or less, IRS said.
The credit is phased out for employers with 25 fulltime employees or more or that pay average annual wages of $50,000 or more. Because the eligibility rules are based in part on the number of FTEs, and not simply the number of employees, businesses that use part-time help may qualify even if they employ more than 25 individuals, IRS said.