GAO: Small business tax credit for healthcare is underused

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A tax credit designed to make it easier for small businesses to offer health insurance is underused, a government report finds.

The Small Employer Health Insurance Tax Credit, which was created under the Affordable Care Act, was intended to help small businesses and tax-exempt organizations that pay at least half of their employees' health insurance premiums, according to a Government Accountability Office report. Smaller skilled nursing and assisted living facilities could qualify as small businesses.

 The credit, which became available for certain employers with low-wage earning employees for tax years beginning after Dec. 31, 2009, was projected to apply to between 1.4 million and 4 million small businesses. Only 170,000 employers used the credit.

For many employers, the size of the credit was not great enough to incentivize them to provide insurance. Complicated eligibility criteria also discouraged use, according to the report.

Additionally, “tax preparer groups GAO met with generally said the time needed to calculate the credit deterred claims. Options to address these factors, such as expanded eligibility requirements, have trade-offs, including less precise targeting of employers and higher costs to the federal government.”

Click here to read the GAO report.

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