If you’re a small business owner with fewer than 25 full-time equivalent employees you may be eligible for the small business health care credit.
What is the Small Business Health Care Credit?
The small business health care tax credit, part of the Patient Protection and Affordable Care Act enacted in 2010, is
How Does the Credit Save Me Money?
The tax credit is worth up to 50 percent of your contribution toward employees’ premium costs (up to 35 percent for tax-exempt employers). The tax credit is highest for companies with fewer than 10 employees who are paid an average of $27,100 or less in 2019 ($26,600 in 2018). The smaller the business, the bigger the credit is. For example, if you have more than 10 FTEs or if the average wage is more than $27,100, the amount of the credit you receive will be less.
Note: The credit is available only if you get coverage through the SHOP Marketplace.
Here’s an example: If you pay $50,000 a year toward workers’ health care premiums–and you qualify for a 15 percent credit–you’ll save $7,500. If you save $7,500 a year from tax year 2017 through 2018, that’s a total saving of $15,000. And, if in 2019 you qualify for a slightly larger credit, say 20 percent, your savings go from $7,500 a year to $10,000 a year.
Is My Business Eligible for the Credit?
To be eligible for the credit, you must cover at least 50 percent of the cost of single (not family) health care coverage for each of
Let’s take a closer look at what
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. In this example, the average wage would be $20,000.
Can Tax-Exempt Employers Claim the Credit?
Yes. The credit is refundable for small tax-exempt employers too, so even if you have no taxable income, you may be eligible to receive the credit as a refund as long as it does not exceed your income tax withholding and Medicare tax liability.
Can I Still Claim the Credit Even If I Don’t Owe Any Tax This Year?
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
Can I File an Amended Return and Claim the Credit for Previous Tax Years?
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.
Businesses that have already filed and later find that they qualified in 2016 or 2017 can still claim the credit by filing an amended return for one or both years.
Don’t hesitate to call if you have any questions about the small business health care credit.