For the love of your business

Can I get a health care tax credit for my small business?

Clarifying Questions

Q:     Can I get a health care tax credit for my small business?   

–Curious Business Owner

A:      Dear Curious:

Health care tax credits can be a significant benefit for small businesses that want to provide healthcare for their employees.

Not every small business will qualify for the tax credit. To determine if your business can use the health care tax credit, you must meet all the following qualifications:

  • Your business must have fewer than 25 full-time or full-time equivalent (FTE) employees.
  • Your average employee yearly salary must be $50,000 or less.
  • Your business must cover at least 50% of all full-time employees’ insurance premiums.
  • You must offer healthcare coverage to all full-time employees through the Small Business Health Options Program (SHOP) marketplace. You do not have to offer coverage to their dependents or to part-time employees.

If you meet these requirements, your business can claim the health care tax credit. The credit covers up to 50% of your contributions to your employees’ premiums. For example, if you had 10 full-time employees and paid a total of $5,000 toward their premiums, the credit would total $2,500. The credit for non-profit organizations, however is only 35%.

 A note about the SHOP marketplace: To be eligible to offer coverage through the SHOP marketplace, your business:

  • Must have 50 or fewer FTE employees (and at least 1 FTE employee other than the owners, partners their spouses and family members).
  • Must offer coverage to all FTE employees who average 30 or more hours per week.
  • Needs to enroll at least 70% of the FTE employees you offer coverage to (excluding those who already have health insurance).
  • Must have at least one office or employee located in the state whose SHOP marketplace you want to use.

If you are interested in the health care tax credit, sit down with a Creative Business Lawyer® for guidance. A Creative Business Lawyer® can help you structure your business and employee insurance coverage to take advantage of this valuable credit and every tax break available to your business.

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