The White House and the Internal Revenue Service just released the details on eligibility for companies that want to get a tax credit under the new healthcare legislation.

To start with, generally, the smaller your business, the greater the tax credit. The max credit goes to companies that have 10 or fewer full timers and pay annual average wages of $25,000 or less. Once your company hits 25 FTEs receiving average annual wages of $50,000 per year, the credit phases out completely.

More details:

Dental and eyecare. Besides getting credit for the usual health coverage, employers can get the credit for supplemental dental and vision plans — or what’s known as limited-scope coverage. To get the credit, eligible small employers must pay at least 50% of the premium of such coverage.

Determining FTEs. You have some flexibility here, and that’s important because the value of the credit goes down as your number of FTEs goes up. The new guidance allows employers to choose from among three different methods of determining hours to minimize paperwork and still get the maximum credit. Employers can use (a) actual hours of service,  (b) an estimate of hours based on total days of service, or (c) an estimate based on total weeks of service.

State-based credits. Except in a few instances, the federal tax credit won’t be reduced if you get a state healthcare tax credit or subsidy — currently available in 20 states. You’ll get the full federal credit based on its entire contribution, as long as the federal credit doesn’t exceed the employer’s net contribution.

See IRS Notice 2010-44 for more details. The notice gives examples to help employers decide if they qualify for the credit. Generally, small businesses that pay at least half the cost of single coverage qualify. The maximum credit from 2010 to 2013 will be:

• 35% of premiums paid for eligible small business employers, and
• 25% of premiums paid by tax-exempt organization employers.