Claiming the ACA Small Business Health Care Tax Credit

screen shot of tax form 8941

Health Care Tax Credit for Small Businesses – Affordable Care Act

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This post is for small businesses with fewer than 25 full-time equivalent (FTE) employees. Your company may be eligible for the small business health care tax credit. We hope you find this information useful.

According to the IRS:

“The small business health care tax credit benefits employers that:

• Have fewer than 25 full-time equivalent employees
• Pay average wages of less than $50,000 a year per FTE (indexed annually for inflation beginning in 2014)
• For tax years 2015 and 2016, the inflation-adjusted amount is $52,000
• Pay at least half of employee health insurance premiums

To be eligible for this credit, you must have purchased coverage through the small business health options program, also known as the SHOP marketplace.”

Maximum Credit and Eligibility

“For tax years 2010 through 2013, the maximum credit is 35 percent of premiums paid for small business employers and 25 percent of premiums paid for small tax-exempt employers such as charities.

For tax years beginning in 2014 or later, there are changes to the credit:

• The maximum credit increases to 50 percent of premiums paid for small business employers and 35 percent of premiums paid for small tax-exempt employers.
• To be eligible for the credit, a small employer must pay premiums on behalf of employees enrolled in a qualified health plan offered through a Small Business Health Options Program (SHOP) Marketplace or qualify for an exception to this requirement.
• The credit is available to eligible employers for two consecutive taxable years.”

Claiming the Credit

“You must use Form 8941, Credit for Small Employer Health Insurance Premiums, to calculate the credit. For detailed information on filling out this form, see the Instructions for Form 8941.

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-exempt organization, include the amount on line 44f of the Form 990-T, Exempt Organization Business Income Tax Return. You must file the Form 990-T in order to claim the credit, even if you don’t ordinarily do so.

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-exempt employer, you may be eligible for a refundable credit.”

Learn more about the small business health care tax credit.

We hope you found this information helpful. If your growing company expands to 50+ full time equivalent employees, Passport Software offers comprehensive Affordable Care Act Software to simplify reporting and compliance throughout the year.




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Great advice, easily explained
for you to grow your business!