Will I qualify for small business health care tax credits?
You may qualify for employer health care tax credits if you have fewer than 25 full-time equivalent employees making an average of about $50,000 a year or less.
To qualify for the Small Business Health Care Tax Credit, you must pay at least 50% of your full-time employees' premium costs. You don’t need to offer coverage to your part-time employees or to dependents.
The tax credit is worth up to 50% of your contribution toward employees' premium costs (up to 35% for tax-exempt employers).
The credit is available only if you get coverage through the SHOP Marketplace.
Higher benefits for smaller businesses
The tax credit is highest for companies with fewer than 10 employees who are paid an average of $25,000 or less. The smaller the business, the bigger the credit.
Example of how the tax credit works
Example for an employer who qualifies for the maximum credit worth 50% of their premium contribution in 2014:
Number of employees: 10
Wages: $250,000 total or $25,000 per employee
Employer contribution to employee premiums: $70,000
Tax credit amount: $35,000 (50% of employer's contribution)
Find out if you qualify for the small business health care tax credit
You can find out if you qualify for the small business health care tax credit by visiting IRS.gov. You can also consult with your tax advisor or accountant to learn if you qualify, and if so, how much your credit will be.
Have questions about the SHOP Marketplace for businesses with 50 or fewer employees? Call 1-800-706-7893 (TTY users: 1-800-706-7915). Hours: Monday through Friday, 9 a.m. to 7 p.m. EST. Agents and brokers may also use this number.
Where can I learn more about the small business health care tax credit?
The Internal Revenue Service has more information about the small business health care tax credit.
What if I have seasonal workers?
Generally, seasonal workers aren't included in the full-time employee and wage calculation unless they work for you more than 120 days during the tax year.
How do I determine how many employees I have?
In order to qualify for a small business health care tax credit, make sure you have fewer than 25 full-time equivalent (FTE) employees, especially if you have a mixture of full-time and part-time employees.
Employer size is based on full-time equivalent employees and hours of service. An employee's hours of service include each hour the employee is paid or will be paid during the tax year.
If you have fewer than 25 FTEs making an average of about $50,000 a year or less, you may qualify for the tax credit.
For example, an employer who has 46 part-time employees that are paid for 1,040 hours of work in a year, has 23 full-time equivalent employees.
Find out the 3 ways to calculate your number of full-time employees.
Do I have to use SHOP to claim the tax credit?
Yes, for 2014 and following years. While the tax credit has been open to eligible employers since tax year 2010, starting in 2014 you must buy coverage through SHOP to claim the credit. If you currently claim the credit, it's important to take this into account as you make your coverage plans for 2014.