Tax credits for health care for small businesses

Maybe you qualify for the deduction for employer health insurance if you have fewer than 25 full-time equivalent employees earning an average of about $ 50,000 a year or less. For tax years beginning in 2014 or later, there are changes to the credit:

 

Tax credits for health care for small businesses

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.

For some small businesses and tax-exempt organizations, an enhanced version of the credit will be effective beginning January 1, 2014.

 

Qualify for the tax credit for health care for small businesses

To qualify for the tax credit, you must apply all of the following:

  • You have fewer than 25 full-time equivalent employees (FTE)
  • The average salary of employees is about $ 50,000 a year or less
  • You pay at least 50% of the premium costs of its full-time employees
  • You offer coverage to their full-time employees through Market SHOP

The deduction is up to 50% of their contribution towards the cost of the premium of employees (up to 35% for tax-exempt employers). You do not have to offer coverage to part-time employees (those working less than 30 hours a week) or dependents who qualify for the tax credit.

Other Small Business Health Care Tax Deductions

A tax deduction is greater for businesses with fewer than 10 employees earn an average of $ 25,000 or less. How much smaller the business, the more the deduction. You can purchase coverage for their employees in different ways. But the only way to qualify for the tax credit for health care for small business is using the SHOP Marketplace. In general, temporary workers are not included in the calculation of full-time employees and wages unless they work for you for more than 120 days during the tax year. 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.

 

How do you claim health care credit for small business?

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