Small Business Health Insurance Credit

As a self employed business owner I was curious if the new credit available to small business owners who provide health insurance coverage to their employees was available for the health insurance my business provides for me.

The credit is 35% of the employer’s contribution towards the employee’s health insurance. To qualify the small business must offer health insurance to its employees as part of their compensation and contribute at least half of the total premium cost. To qualify for the full credit the business must have no more than 10 full-time employees and the employee’s annual wages must average no more than $25,000. The credit is reduced to zero if there are more than 25 employees with an average wage of more than $50,000.

The credit is available in 2010, 2011 & 2012 as long as the health insurance is purchased from an insurance company licensed under state law. Starting in 2014 the credit increases to 50% but is only available to a small business that purchases health insurance coverage through a state exchange and it is only available for 2 years. The maximum 2 years for the credit does not start before 2014. This means that for eligible small businesses qualifying in 2010 there is a credit available for 6 years on the health insurance coverage provided on employees.

So far so good, I could potentially qualify for this credit and then I discovered the paragraph on self-employed individuals. It specifically includes partners, sole proprietors, 2% shareholders of an S-corp and it states that for purposes of this credit we are not considered employees. It also states that the credit is not available for domestic employees. AND there is a special rules that prevents sole proprietors from receiving the credit for their family members. So nope I am not allowed to take this credit for the health insurance coverage my small business provides for me.

Does it work for you?