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Are you Eligible for the Small Business Health Care Tax Credit?

Posted On
Chris Bibey

As a small employer, your company may be eligible for the Small Business Health Care Tax Credit. With this tax credit, saving money is a real possibility. Here is an example shared by the IRS:

"If you pay $50,000 a year toward employees' health care premiums — and if you qualify for a 15 percent credit, you save $7,500."

As the Affordable Care Act appears to be here to stay, it's a good idea to investigate how you might benefit.

Eligibility Requirements

With the ability to save so much money, all small employers should be interested in the Small Business Health Care Tax Credit. But here is the question: does your company qualify?

Eligibility requirements include:

  • Having purchased coverage through the SHOP marketplace (Small Business Health Options Program).
  • Fewer than 25 full-time employees.
  • Paying an average wage of $50,000 per year or less.
  • Paying at least one half of employee health insurance premiums.

Big Change from 2014

The IRS made some big changes to the Small Business Health Care Tax Credit in 2014. Most notably, the maximum credit increased to 35 percent of premiums paid for small tax-exempt employers and 50 percent for traditional small business employers.

Note: eligible employers can take advantage of the credit for two consecutive years.

Did you Miss the Boat?

If you are just now learning about the Small Business Health Care Tax Credit, you are not out of luck. Take a look at your 2014 tax return. If you neglected to claim the credit, you still have time to file an amended return. You can use Form 8941, Credit for Small Employer Health Insurance Premiums, to calculate how much you qualify for.

Many small businesses struggle to provide employees with high quality, comprehensive health insurance coverage. This tax credit benefits both employers and employees. The company itself saves money, while employees gain access to a policy they can trust.