One of the provisions of the Affordable Care Act (ACA) is the Small Business Health Care Tax Credit. This tax credit has been available to small businesses since 2010 when the ACA was originally passed. The current eligibility parameters are:
- Businesses including tax-exempt organizations that employ no more than 25 full-time equivalent employees. Business owners and shareholders and their family members are not considered employees.
- Average annual wages (excluding business owners and shareholders and their family members) do not exceed $50,800(as adjusted for inflation).
- Business pays at least 50% of the employee’s individual health insurance premium
- As of June 1, 2014, the group health plan must be purchased through the SHOP which is the small business health insurance marketplace. Corporate Coverage is an authorized broker and can help you secure coverage through the SHOP marketplace.
- 75% of eligible employees must participate in the plan. Eligible employees are those that work more than 30 hours per week. Employees who have other employer sponsored or government sponsored coverage can be excluded from the participation count. Participation requirements are waived during annual SHOP open enrollment periods. The first open enrollment period is for applications received between May 15, 2014 and June 15, 2104.
- The maximum tax credit is 50%(35% for tax-exempt employers)of the premiums that are paid by the employer not to exceed the average premiums for the small group market in the employers rating area as reported by the Department of Health and Human Services. The credit is reduced as the employer size increases and the average wages increase. The largest tax credit would be for an employer with less than 10 employees with average wages of $25,000 or less.
- Beginning in 2014, the tax credit is available for two consecutive years. It is filed on tax form 8941.
Click here for a link to the IRS website that provides the details on this available credit and consult with your accountant. To assist you in determining your eligibility, two calculators are available:
- Click here for the calculator that helps you determine the number of full/time employees/equivalents.
- Click here for the calculator that will estimate your tax credit.
If you will be taking advantage of the tax credit, please advise us during our renewal meeting so that we can provide you with the applicable SHOP plans.