Feds Announce New Healthcare Tax Credit

Starting this year, some small businesses will be able to claim a new federal tax credit, which could pay up to 35 percent of employee health-care costs, the Treasury Department announced this week. That amount will increase to 50 percent in 2014, AOL Small Business reported.

Four million small businesses will save $40 billion through 2019, the Obama administration estimates, and the new tax credit will not be reduced by state health-care tax credits or subsidies, except in rare cases to prevent abuse of the credit. Business owners will be able to claim the credit starting with their 2011 tax bills.

To be eligible, companies must pay at least half the cost of employees' insurance premiums upfront, and the credit is restricted to companies with 25 or fewer employees, with an average staff salary of less than $50,000.

The business community has met the news with skepticism, however. The National Federation of Independent Business recently joined 20 states in an effort to have the health-care law overturned, citing concerns about fines on firms that do not provide employees with coverage. And the U.S. Chamber of Commerce's director of health policy, James Gelfand, recently told Bloomberg BusinessWeek that the credit is too small and most firms will not be eligible for it.