The Small Business Health Care Tax Credit was designed for small business owners with 25 of fewer full-time employees and equivalents in an effort to provide health care coverage for their employees. Under the Affordable Care Act, Applicable Large Employers (ALEs) are required to offer minimum essential coverage to their employees, as they employee 50 or more full-time and full-time equivalents. Although smaller businesses are not subject to the ALE mandate, the ACA aims to assist these businesses with a tax credit with the hopes of making employer-sponsored health care coverage more widespread. Is your business eligible for the Small Business Health Care Tax Credit? Find out below.
Do you have fewer than 25 employees?
If you answered YES, the sub-question is how many full-time and part-time employees? To be eligible for the credit, you must have 25 full-time employees or full-time equivalents OR a qualified combination of full-time and part-time employees. Two part-time employees equal one full-time employees for this tax credit eligibility. The math applies accordingly.
Did your employees earn less that $52,000 for the 2015 tax year?
If YES, you may be eligible for this credit. This figure will be annually adjusted by the IRS to reflect inflation.
Did you pay at least 50% of health insurance premiums for your employees?
As a small business, you must have paid at least half of the health insurance premiums to be eligible for this credit.
Did you offer a qualified health plan?
To find out if the health plan offered to your employees qualified as a qualified health plan, visit the Small Business Health Options Program (SHOP) Marketplace here. Exceptions to this rule, including mid-year health plan changes, are illustrated here.
Have you claimed this credit already?
Small businesses are only eligible to claim this tax credit for two consecutive years. This law was put into effect in 2014.
Please note that the maximum credit for small businesses is 50% of paid premiums, while charities and tax-exempt employers are eligible for a credit of 35% of paid premiums. Small business may claim this credit through Form 8941, while tax-exempt employers and charities will use Form 990-T.
For more information on the Small Business Health Care Tax Credit, click here.