tax credit

Small Business Healthcare Tax Credit

It’s been said once or twice before, sometimes, great things come in small packages. And in recognition of the value of your small business, we have a word of good news for you. In the upcoming tax season, you may receive some tax alleviation for merely being small.

Health Tax Credit

It’s been said once or twice before, sometimes, great things come in small packages. And in recognition of the value of your small business, we have a word of good news for you. In the upcoming tax season, you may receive some tax alleviation for merely being small. As an owner, you can count your healthcare expenses as a business expense. So, while there are a few requirements and some restrictions, you might be looking forward to a tax break next spring, thanks to the Small Business Healthcare Tax Credit.

What is the Small Business Healthcare Tax Credit?

The Small Business Healthcare Tax Credit, included in the Affordable Care Act, benefits small employers who provide health coverage to their employees. This could be worth up to 50 percent of costs paid in employees’ premiums, or 35 percent for non-profits. With this new addition, it pays to be small and to care for your employees.

Requirements to qualify: 

Generally, the only way a small business or non-profit can claim the Small Business Healthcare Tax Credit is by enrolling in the Small Business Health Options Program (SHOP). And to qualify for this program, a business must: a
  • Have fewer than 25 full-time employees
  • Pay an average salary to the employees that is less than $51,600 per year. This does not apply to the owner’s salary.
  • Pay at least 50 percent of their employees’ health insurance premiums
  • SHOP coverage is offered to all full-time employees
    • As an employer, offering this coverage to employees who are considered part-time, is optional and not required as it is for those working full-time.
The smaller your company, the bigger the credit. And the benefit is highest for companies with fewer than ten employees paid under $25,000. There are some restrictions, however.

Limitations: 

The 50 percent tax credit represents the maximum credit available to a business. However, this credit will be reduced under certain circumstances as some small employers might not qualify for the full amount. These circumstances are listed below:

  • The employer has more than ten full-time equivalent employees
  • The annual wages of the business’s full-time employees exceeds $25,800 in the years 2015 or later
  • The company’s health insurance premiums are higher than the average amount paid in premiums in their geographical area

It is also important to note that there are no tax credits for the owners of the business. This means that small businesses can not receive credit for insurance premiums paid on the owner’s behalf. “Owners†include owners of corporations, partners in partnerships, and sole proprietors. Additionally, there is no tax credit available to employees who own more than five percent of a C corporation and those who own more than two percent of an S corporation.

Flexible Credit: 

The tax credit can be applied forward or back to other tax years. So, let’s say a small business didn’t owe any money in taxes one year but did a year prior. That company would be able to apply their credit to their balance and still receive the benefits. Similarly, an employer could carry their credit forward in expectation of tax liabilities in the coming year.

While there are many incentives to offer health insurance to your employees, as a small business owner, you may feel financially unable to do so. That’s why this tax credit aims to assist small businesses like yours to ease such steep healthcare costs. If you are interested in offering health insurance to your employees but don’t know where to begin, reach out to an experienced health insurance professional. We at Bernardini and Donovan are here to advise each of your questions and concerns for this endeavor. Call on us today!

Share this post

Share on facebook
Share on google
Share on twitter
Share on linkedin
Share on pinterest
Share on print
Share on email