Small Business Healthcare Tax Credit

If you are a small employer with fewer than 25 full-time equivalent employees that earn an average wage of less than $50,000 a year and you pay at least half of employee health insurance premiums…then there is a tax credit that may put money in your pocket.

Health Care Credit Questions and Answers

The Small Business Health Care Tax Credit is specifically targeted to help small businesses and tax-exempt organizations. The credit can enable small businesses and small tax-exempt organizations to offer health insurance coverage for the first time. It also helps those already offering health insurance coverage to maintain the coverage they already have.

For tax years beginning in 2014 or later, small employers will find the following changes to the credit-

• The maximum credit increases to 50% of qualifying premiums for small business employers.
• To be eligible for the credit, a small employer must pay premiums on behalf of employees enrolled in a qualified health plan offered through a Small Business Health Options Program (SHOP) Marketplace or qualify for an exception to this requirement.
• The credit is available to eligible employers for two consecutive taxable years.
• Employers calculate the small business health care credit on Form 8941.

The size of the tax credit decreases as your company’s average wage climbs from $25,000 to $50,000 and as your full-time-equivalents increase from 10 to 25. The highest rebate (35 percent) goes to 20 employees with an average employee income of $25,000. With 17 FTEs earning an average of $38,000, there’s no rebate.

Understanding the Small Employer Health Care Tax Credit

Health Care Tax Credit Estimator

Post Updated April 25, 2015