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.
See if you qualify for the Small Business Health Care Tax Credit
To qualify for the tax credit, all of the following must apply:
- You have fewer than 25 full-time equivalent (FTE) employees
- Your average employee salary is about $50,000 per year or less
- You pay at least 50% of your full-time employees’ premium costs
- You offer coverage to your full-time employees through the SHOP Marketplace
The tax credit is worth up to 50% of your contribution toward your employees’ premium costs (up to 35% for tax-exempt employers).
You don’t need to offer coverage to your part-time employees (those working fewer than 30 hours per week) or to dependents to qualify for the tax credit.
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.
Have questions about the SHOP Marketplace for businesses with 50 or fewer employees? Call 1-800-706-7893 (TTY users: 711). Monday through Friday, 9 a.m. to 7 p.m. ET. Agents and brokers helping small businesses may also use this number.
- What’s an example of how the tax credit works?
Here’s one scenario: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)
- Do I have to buy my coverage through the SHOP Marketplace to claim the tax credit?Yes. You can buy coverage for your employees various ways. But the only way to qualify for the Small Business Health Care Tax Credit is by using the SHOP Marketplace.
- 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. Learn more about seasonal employees from the IRS.
- 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.