Small businesses benefit from health reform right away. Here’s how.

Small businesses will see immediate benefits from health reform. Here’s how.

Small employers with no more than 25 employees and average annual wages of less than $50,000 that purchase health insurance for employees will receive a tax credit in two phases.

Phase I starts immediately: For tax years 2010 through 2013, the law provides a tax credit of up to 35% of the employer’s contribution toward the employee’s health insurance premium if the employer contributes at least 50% of the total premium cost or 50% of a benchmark premium. The full credit will be available to employers with 10 or fewer employees and average annual wages of less than $25,000. The credit phases-out as firm size and average wage increases. Tax-exempt small businesses meeting these requirements are eligible for tax credits of up to 25% of the employer’s contribution toward the employee’s health insurance premium.

Phase II: For tax years 2014 and later, for eligible small businesses that purchase coverage through the state Exchange, the act provides a tax credit of up to 50% of the employer’s contribution toward the employee’s health insurance premium if the employer contributes at least 50% of the total premium cost. The credit will be available for two years. The full credit will be available to employers with 10 or fewer employees and average annual wages of less than $25,000. The credit phases-out as firm size and average wage increases. Tax-exempt small businesses meeting these requirements are eligible for tax credits of up to 35% of the employer’s contribution toward the employee’s health insurance premium.