Insurance & Employee Benefits
Small employer? Get the credit you deserve.
If you are a small employer. . .
With fewer than 25 full-
That pays an average wage of less than $50,000 a year?
And pays at least half of employee health insurance premiums?
. . .then there is a tax credit that may put money in your pocket.
What You Need to Know about the Small Business Health Care Tax Credit Source: irs.gov
How will the credit make a difference for you?
For tax years 2010 through 2013, the maximum credit is 35 percent for small business employers and 25 percent for small tax-
Here’s what this means for you. If you pay $50,000 a year toward workers’ health care premiums – and if you qualify for a 15 percent credit, you save … $7,500. If you save $7,500 a year from tax year 2010 through 2013, that’s total savings of $30,000. If, in 2014, you qualify for a slightly larger credit, say 20 percent, your savings go from $7,500 a year to $12,000 a year.
Even if you are a small business employer who did not owe tax during the year, you can carry the credit back or forward to other tax years. Also, since the amount of the health insurance premium payments are more than the total credit, eligible small businesses can still claim a business expense deduction for the premiums in excess of the credit. That’s both a credit and a deduction for employee premium payments.
There is good news for small tax-
And finally, if you can benefit from the credit this year but forgot to claim it on your tax return there’s still time to file an amended return.
Click here if you want more examples of how the credit applies in different circumstances.
Can you claim the credit?
Now that you know how the credit can make a difference for your business, let’s determine if you can claim it.
To be eligible, you must cover at least 50 percent of the cost of single (not family) health care coverage for each of your employees. You must also have fewer than 25 full-
Let us break it down for you even more.
You are probably wondering: what IS a full-
Now let’s talk about average wages. Say you pay total wages of $200,000 and have 10 FTEs. To figure average wages you divide $200,000 by 10 – the number of FTEs – and the result is your average wage. The average wage would be $20,000.
Also, the amount of the credit you receive works on a sliding scale. The smaller the business or charity, the bigger the credit. So if you have more than 10 FTEs or if the average wage is more than $25,000, the amount of the credit you receive will be less.
If you need assistance determining if your small business or tax exempt organization qualifies for the credit, try this step-
How do you claim the credit?
You must use Form 8941, Credit for Small Employer Health Insurance Premiums, to calculate the credit.
If you are a small business, include the amount as part of the general business credit on your income tax return.
If you are a tax-
Don’t forget … if you are a small business employer you may be able to carry the credit back or forward. And if you are a tax-
For 2014 and beyond, small employers who purchase coverage through the Health Insurance Exchanges can receive a tax credit for two years up to 50% of their contribution.
Internal Revenue Service
Tools from the Carriers
Oxford Health Plans -
Small Employer Tax Credits
The Affordable Care Act helps small businesses and small tax-
If you have fewer than 25 employees and provide health insurance, you may qualify for a small business tax credit of up to 35% (up to 25% for non-
This credit will increase in 2014 to 50% (35% for non-
Health Care Reform Tools