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.


Heather Martin

Heather Martin

Senior Manager

Related Posts
According to its tagline, Atlanta Business RadioX spotlights “the city’s best businesses and the people who lead them.”   PYA is pleased to share that one of its own, Consulting Principal...
Read More

PYA’s Lori Foley Shared Insight in Live Radio Interview

Many Americans have a 401(k) retirement savings plan as a benefit of employment with their employers.  They contribute a percentage of their compensation to their 401(k) each pay period with...
Read More

Taking Distributions from Your 401(k): What You Need to Know

The recent Tax Cuts and Jobs Act (TCJA) imposes a limit on deductions for business interest for taxable years beginning in 2018.  The limit, like other aspects of the law,...
Read More

IRS Sheds Light on New Limit on Business Interest Expense Deductions

The Tax Cuts and Jobs Act (TCJA) of 2017 brings sweeping changes for many businesses. Along with a reduced corporate tax rate and the elimination of the Alternative Minimum Tax...
Read More

Looking Ahead: Net Operating Loss Rules under the New Tax Act

Are you feeling unease about the impending Tuesday, April 17 tax filing deadline? Fear not –the Internal Revenue Service (IRS) permits a taxpayer to file an extension to allow time...
Read More

The Tax Deadline Looms: Need More Time?

Businesses are increasingly reliant on technology to achieve organizational objectives. However, with the convenience and efficiency of technology come intensifying risks of data loss and theft. High-profile data breaches top...
Read More

Cybersecurity Framework “SOCs” It to Cyber Threats

PYA has released a white paper that discusses the importance of the AICPA’s cybersecurity risk management framework and System and Organization Controls for Cybersecurity in assessing the strength and effectiveness...
Read More

New PYA White Paper: Framework Offers Companies Solution for Cybersecurity Risk

Medicare cards are getting a much-needed facelift.  The Centers for Medicare & Medicaid Services has announced its intention to remove Social Security numbers from the cards in an effort to...
Read More
Medicare card scam

New Medicare Cards in the Mail—Don’t Fall Prey to Scammers

The ink on the Tax Cuts and Jobs Act (TCJA), which swept in a tidal wave of changes to federal tax rules, had been dry for only seven weeks before...
Read More

New Budget Agreement Brings Additional Tax Changes

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

* indicates required
Monthly eNewsletters
See more newsletter and alert options.

PYA Population Health Ascend

PYA Healthcare Blog

PYA Thought Leadership Services

The Healthcare Loop