Small Business Health Care Credit for Owner Spouses?

Posted by Andy
It has been debated, but now settled by the IRS. Spouses of owners who are on the company health insurance policy will generally not qualify for the health insurance credit that was a key party of the recent Obamacare legislation. While this may be disappointing to many who legitimately employ their spouse in the business, it should not come as a surprise to anyone as this is in line with the general spirit of tax law.

Today the IRS answered "no" in Notice 2010-82:

The definition of "family members" for purposes of § 45R does not specifically refer to spouses. However, spouses of certain business owners are excluded from being taken into account as employees by operation of the ownership attribution rules in the Code. Therefore, the following individuals also are not taken into account as employees for purposes of § 45R: (1) the employee-spouse of a shareholder owning more than two percent of the stock of an S corporation; (2) the employee-spouse of an owner of more than five percent of a business; (3) the employee-spouse of a partner owning more than a five percent interest in a partnership; and (4) the employee-spouse of a sole proprietor. See § 45R(e)(1)(A); 1372(b), 318, 416(i)(1)(B)(i).

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