Employers: Don’t Overlook the Small Business Health Care Tax Credit

Do you own or run a small business or tax-exempt group with fewer than 25 full-time employees? If you do, you should know that the Small Business Health Care Tax Credit can help you provide insurance to your employees. You may be able to save on your taxes if you paid for at least half of their health insurance premiums. Here are several things that you should know about this important credit:

• Maximum Credit.  For tax years beginning in 2014 and after, the maximum credit is 50 percent of premiums paid by small business employers. The limit is 35 percent of premiums paid by tax-exempt small employers, such as charities.
• Number of Employees.  You may qualify if you had fewer than 25 employees who work full-time, or a combination of full-time and part-time. For example, two half-time employees equal one full-time employee for purposes of the credit.
• Qualified Health Plan.  You must have paid premiums for your employees enrolled in a qualified health plan offered through a Small Business Health Options Program, or SHOP, Marketplace. There are limited exceptions to this requirement.
• Average Annual Wages.  To qualify for the credit, the average annual wages of your full-time equivalent employees must have been less than $51,000 in 2014. The IRS will adjust this amount for inflation each year.
• Half the Premiums.  You must have paid a uniform percentage of the cost of premiums for all employees. The amount you paid must be equal to at least 50 percent of the premium cost of the insurance coverage for each employee.
• Two Year Limit.  An eligible employer may claim the credit for any two-consecutive taxable years, beginning in or after 2014. This credit can be claimed for two consecutive years, even if you claimed the credit at any point from 2010 through 2013.
• Tax Forms to Use.  All employers use the Form 8941, Credit for Small Employer Health Insurance Premiums, to calculate the credit. For-profit businesses claim the credit on Form 3800, General Business Credit. Tax-exempt organizations claim it on Form 990-T, Exempt Organization Business Income Tax Return.

If you are a for-profit business and the credit is more than your tax liability for the year, you can carry the unused credit back or forward to other tax years. If you are a tax-exempt employer, you may be eligible to receive the credit as a refund. This applies so long as it does not exceed your income tax withholding and Medicare tax liability for the year.

You can learn more about General Business Tax Credits in the Federal Tax Course.

Education Tax Credits: Two Benefits to Help You Pay for College

Did you pay for college in 2014? If you did it can mean tax savings on your federal tax return. There are two education credits that can help you with the cost of higher education. The credits may reduce the amount of tax you owe on your tax return. Here are some important facts you should know about education tax credits.

American Opportunity Tax Credit:

• You may be able to claim up to $2,500 per eligible student.
• The credit applies to the first four years at an eligible college or vocational school.
• It reduces the amount of tax you owe. If the credit reduces your tax to less than zero, you may receive up to $1,000 as a refund.
• It is available for students earning a degree or other recognized credential.
• The credit applies to students going to school at least half-time for at least one academic period that started during the tax year
• Costs that apply to the credit include the cost of tuition, books and required fees and supplies.
• Lifetime Learning Credit:
• The credit is limited to $2,000 per tax return, per year.
• The credit applies to all years of higher education. This includes classes for learning or improving job skills.
• The credit is limited to the amount of your taxes.
• Costs that apply to the credit include the cost of tuition, required fees, books, supplies and equipment that you must buy from the school.

For both credits:

• The credits apply to an eligible student. Eligible students include yourself, your spouse or a dependent that you list on your tax return.
• You must file Form 1040A or Form 1040 and complete Form 8863, Education Credits, to claim these credits on your tax return.
• Your school should give you a Form 1098-T, Tuition Statement, showing expenses for the year. This form contains helpful information needed to complete Form 8863. The amounts shown in Boxes 1 and 2 of the form may be different than what you actually paid. For example, the form may not include the cost of books that qualify for the credit.
• You can’t claim either credit if someone else claims you as a dependent.
• You can’t claim both credits for the same student or for the same expense, in the same year.
• The credits are subject to income limits that could reduce the amount you can claim on your return.

Education tax credits are covered in the Lesson 18 of the Federal Income Tax Course

Here are four tax credits you should consider when filing your 2013 taxes.

Tax credits help reduce the taxes you owe. Some credits are also refundable. That means that, even if you owe no tax, you may still get a refund.

Earned Income Tax Credit

The Earned Income Tax Credit is a refundable credit for people who work but don’t earn a lot of money. It can boost your refund by as much as $6,044. You may be eligible for the credit based on the amount of your income, your filing status and the number of children in your family. Single workers with no dependents may also qualify for EITC. you can use the EITC Assistant tool on the IRS website to see if you can claim this credit. 

Child and Dependent Care Credit

The Child and Dependent Care Credit can help you offset the cost of daycare or day camp for children under age 13. You may also be able to claim it for costs paid to care for a disabled spouse or dependent.

Child Tax Credit

The Child Tax Credit can reduce the taxes you pay by as much as $1,000 for each qualified child you claim on your tax return. The child must be under age 17 in 2013 and meet other requirements. Use the Interactive Tax Assistant tool on IRS.gov to see if you can claim the credit. 

American Opportunity Tax Credit

The American Opportunity Tax Credit can help you offset college costs. The credit is available for four years of post-secondary education. It’s worth up to $2,500 per eligible student enrolled at least half time for at least one academic period. Even if you don’t owe any taxes, you still may qualify. 

Before you claim any tax credit, be sure you qualify for it.  The Federal Income Tax Course teaches you all about these and other tax credits.