Recent Tax Updates

Changes to Small Business Health Care Tax Credit

June 11, 2014

Since 2010, the Small Business Health Care tax credit has been available to eligible small businesses that offer health insurance and have 25 or fewer employees. The purpose of this credit is to help small businesses pay for the premiums on health insurance for their employees.

The following changes have been made to this credit for tax years beginning in 2014:

  • The maximum credit has increased to 50% of health insurance premiums paid.
  • To be eligible for the credit, the small employer must purchase their health insurance through a Small Business Health Options Program (SHOP) offered through a health insurance exchange (marketplace).
  • The credit will be available for eligible employers for two consecutive tax years.

The credit will work with the new changes as follows:

  • Credit is available to employers with 25 or fewer full-time equivalent employees whose average annual salaries are not more than $50,000.
  • Credit is calculated on a sliding scale with a maximum credit of 50% of the employer’s contribution toward their employees’ health insurance premiums.
  • Businesses must pay at least half the total cost of qualified health insurance coverage for their employees.
  • Maximum credit is available for employers with 10 or fewer full time equivalent employees and average annual wages of no more than $25,000. The credit is then reduced based on each additional employee and for each $1,000 increase in the average annual wages.

An eligible employer claims the credit by completing Form 8941 (Credit for Small Employer Health Insurance Premiums) and including it with their federal return.

Businesses that have already filed and later find that they qualified for this credit in 2013 or an earlier year can still claim the credit by filing an amended return for the affected years.

For more information see the following: