Small Biz Health Care Tax Credit

Small Biz Health Care Tax CreditSmall businesses can claim a larger tax benefit for providing health care to employees in 2014 as a result of the 2010 Affordable Care Act. For tax years 2010 to 2013, the maximum credit was 35 percent of premiums for small businesses, and 25 percent of premiums for tax-exempt organizations. Starting with the 2014 tax year, the maximum credit is 50 percent of premiums for small businesses, and 35 percent for tax-exempt organizations.

To claim a credit, businesses should:

• Cover 50 percent of the cost of individual health care coverage for each employee.

• Have fewer than 25 full-time equivalent employees (FTEs), with average wages of under $50,000. A single full-time employee counts as one FTE, and two half-time employees equal one FTE.

• Purchase a qualified health plan through a Small Business Health Options Program (SHOP) Marketplace.

For the full 50 percent credit, a business must have ten or fewer FTEs who are paid less than $25,000 on average. As the business approaches 25 FTEs and $50,000 in average wages, the credit shrinks until the business is no longer eligible.

In the credit’s first year, 170,300 employers made claims, according to the Government Accountability Office. The tax benefit has provided more than $1 billion in credits since it first became available, according to the Department of Health and Human Services. To calculate the credit, small businesses should use Form 8941, Credit for Small Employer Health Insurance Premiums, available on