News & Resources
Small Business Health Care Tax Credit
September 27, 2010
The Affordable Care Act provides a sliding-scale small employer tax credit to help offset the cost of employer-provided coverage. Generally, a small employer is one with no more than 25 full-time equivalent employees and average annual wages of less than $50,000. In 2010 through 2013, eligible employers may qualify for a tax credit for up to 35% of their contribution toward the employee's health insurance premium. In 2014 and beyond, eligible employers who purchase coverage through an insurance exchange may qualify for a credit for two years of up to 50% of their contribution. Qualified tax-exempt employers would be eligible for a reduced credit.
To determine if your small business or tax exempt organization qualifies for the Small Business Health Care Tax Credit, review the three steps from the IRS fact sheet.
A sole proprietor, a partner in a partnership, a shareholder owning more than 2% of an S corporation, and any owner of more than 5% of other businesses are not considered employees for purposes of the credit. Thus, the wages or hours of these business owners and partners are not counted in determining either the number of employees or the amount of average annual wages, and premiums paid on their behalf are not counted in determining the amount of the credit. Any family member of the business owners or partners, or a member of their household, also is not considered an employee for purposes of the credit. |
