Viewpoint: Pay Attention To New Wellness Tax Credit
Connolly
Many small businesses in Massachusetts are already benefitting from employee wellness programs that can boost productivity and contain the rise of healthcare costs. But these businesses now have even greater incentive to foster a healthy workplace. This year, the state's new Wellness Tax Credit takes effect, making small businesses eligible for up to $10,000 a year in tax relief.
This tax break, which was recently enacted, allows small businesses a tax credit of 25 percent of the costs associated with implementing a certified wellness program. Companies are allowed up to $10,000 a year in tax breaks and must apply for the credit annually.
With a significant opportunity for savings, interested companies that qualify for this new credit should act quickly. The amount of tax credits available is limited to $15 million a year, and the credits are awarded on a first-come, first-served basis. The Massachusetts Department of Public Health estimates that the application will be available on its website early this month.
It's important that business owners know whether the company qualifies and whether current programs are eligible for credits. Qualifying small businesses include trades or entities that are organized as sole proprietorships, partnerships or corporations; small businesses are further defined as those with 500 or fewer employees, most of them in Massachusetts.
If your firm qualifies, it's important to look closely at whether your existing programs are eligible for the credit. Some eligible costs include: the salaries of employees charged with implementing wellness programs; wellness education programs and related costs, such as seminars and newsletters; paid time off for health screenings, wellness check-ups and other related appointments; financial incentives for employee participation in the programs; and costs associated with changes to the worksite that encourage healthy lifestyle choices, such as improvements to stairs, the installation of automatic external defibrillators, and meeting space for educational seminars and workshops, among others.
Companies that don't have such programs in place may find the credit to be an added incentive to implement them in the future, especially since the resulting benefits often go beyond tax savings. Promoting employee wellness through workplace education, incentives and other programs can improve productivity and help control healthcare costs. The cost-savings potential of these programs is documented in a 2011 study published by the American Journal of Health Promotion, which found that healthcare costs rose at a 15-percent slower rate among employees who participate in them.
The Wellness Tax Credit offers significant opportunity not only for companies to save, but to expand employee wellness programs that could increase productivity and produce greater long-term savings. As many companies look for ways to save in today's economic climate, business owners would likely agree that the potential cost savings from containing rising healthcare costs — and receiving tax breaks for doing so — cannot be ignored. Companies should learn more about this new tax credit and whether they qualify, then take the necessary steps to apply for it quickly. For companies that are not offering such programs, now might be a good time to examine how implementing employee wellness initiatives could benefit your employees and your entire company.
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Patrick L. Connolly is a tax partner with BlumShapiro, an accounting, tax and business consulting firm with offices in Massachusetts, Connecticut and Rhode Island.
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