A Hand Up for Businesses: The Small Business Health Care Tax Credit

small business health care tax creditAccording to the U.S. Census Bureau, 89.6% of the 5.73 million businesses in the country have less than 20 employees; 80% of those businesses fail within the first 18 months. It is essential that small businesses find ways to save money, explore opportunities, and increase their bottom line (and their survival rate).  For many businesses that provide healthcare coverage to employees, the Small Business Health Care Tax Credit could be an easy way to save money on those large monthly healthcare bills.

How does a business qualify?

To qualify for the Small Business Health Care Tax Credit, a company must fulfill the following requirements:

  1. Employ no more than 25 full-time equivalent employees.
  2. Pay average employee wages no greater than $52,400—inflation adjustments apply.
  3. Cover at least 50% of full-time employees’ healthcare premiums.
  4. Purchase employee insurance through the Small Business Health Options Program Marketplace.

What constitutes a “full-time equivalent” employee?

For the Small Business Health Care Tax Credit, two employees working 20 hours a week can be added together to equal one full-time employee. For example, 50 employees working 20 hours a week would be equivalent to 25 full-time employees.  It is important to note that the owner, and any of his/her family members working for the company, will not be counted toward the 25-employee quota.

How is this healthcare credit so beneficial to small business owners?

Tax-paying companies are eligible to receive up to a 50% credit on their healthcare bills, while tax-exempt companies could receive a 35% credit. As many business owners know, medical bills can quickly add up–controlling those costs allows business owners to allocate funds elsewhere—e.g., for making strategic hires, buying innovative equipment, or investing in training programs.  When sacrifices are made under the constraints of a small business budget, the opportunity to halve the premiums can be a game-changer.

What tax forms are needed when filing for the credit?

The tax form required depends on whether the company is a tax-paying entity or not. For taxpayers, Form 8941 will be used to calculate the credit, and will be attached to the business tax return. Tax-exempt entities will need to include form 990-T.

Businesses can check to see if they might qualify for the tax credit by accessing the Small Business Health Care Tax Credit Estimator on healthcare.gov.

If you have any questions about the Small Business Health Care Tax Credit, or would like to request a speaker on this topic for your organization or event, contact one of our executives below at (800) 270-9629.


Mark Estroff

Mark Estroff

Principal

Heather Martin

Heather Martin

Senior Manager

Related Posts
PYA was ranked highly for female percentage ownership among the 100 largest accounting firms in the U.S. by Inside Public Accounting. PYA, a national management consulting and accounting firm, has...
Read More

PYA One of the Highest Female Percentage Ownership Among Top 100 U.S. Accounting Firms

It could be your proudest moment—finding out your child or grandchild has been accepted to the college of his or her “dreams.”  What could be better than knowing your financial...
Read More

Financing a College Education – Start NOW with Section 529 Plans

Public and private companies can expect improvements to hedge accounting, as it is becoming more transparent for financial statement users.  With the issuance of Accounting Standards Update (ASU) No. 2017-12,...
Read More

Hedge Accounting: Simplified Reporting, Other Improvements

With the end of 2017 fast approaching, companies may be looking at paying their employees year-end bonuses.  While these types of supplemental payments are likely welcomed by employees, just how...
Read More
supplementary payments

Planning to Pay a Bonus? Know Which Supplemental Payments Get Taxed

Entities with goodwill from business acquisitions can look forward to some long-requested relief from the cost of performing goodwill impairment testing under a recently released Accounting Standards Update (ASU).  FASB...
Read More
goodwill impairment

Recently Issued ASU Simplifies the Test of Goodwill Impairment

China Global Television Network America, one of 42 television channels produced and broadcast by China Central Television (CCTV), the world’s largest broadcaster with a reach of more than 1.2 billion...
Read More
China merger

PYA’s Steven Gu Discusses Future of U.S.-China Trade in Live CGTN Interview

China Global Television Network America, one of 42 television channels produced and broadcast by China Central Television (CCTV), the world’s largest broadcaster with a reach of more than 1.2 billion...
Read More
China merger

PYA’s Steven Gu Discusses ChemChina-Syngenta Deal in Live CGTN Interview

PYA again ranks on INSIDE Public Accounting’s list of Top 100 Accounting Firms.  PYA, a national management consulting and accounting firm, has been ranked as a 2017 Top 100 Firm...
Read More

PYA Among IPA’s Top 100 Largest Accounting Firms

In the past few years, scams capitalizing on new technology and legislation have proliferated. And there seems to be no shortage of tactics used to lure people into these traps. ...
Read More
IRS scams

Knock, Knock: IRS Collection Practices Open Doors for Potential Scams

Share This Insight

If you received value from this article, please share it with your network (e.g., Facebook, Twitter, LinkedIn). Icons below for your convenience.

Stay Current

See more newsletter and alert options.

PYA Population Health Ascend

PYA Healthcare Blog

PYA Thought Leadership Services

The Healthcare Loop