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


Heather Martin

Heather Martin

Senior Manager

Related Posts
Qualified conservation easements are becoming an increasingly popular way to save on your tax bill, but what exactly is a conservation easement, and what do you need to know to...
Read More

Conservation Easements: Save the Land, Save Your Money

In the wake of this year’s devastating hurricane season, the President signed into law the “Disaster Tax Relief and Airport and Airway Extension Act of 2017” (the Act). This law...
Read More

Individual Tax Relief for Disaster Areas

Blockchain technology, one of the biggest technology developments in years, has the potential to transform the accounting and audit (A&A) industry. The potential benefits are numerous, but so are the...
Read More

Blockchain Technology—An Audit and Accounting Awakening

In one of the most unpredictable and hotly contested presidential races in United States history, Donald Trump promised, if elected, to pass, among other things, massive tax reform that would...
Read More
tax reform

Tax Reform—What Stays, What Goes, What’s Left?

As compliance regulations and laws evolve and increase in number, many organizations – hospitals, home health agencies, skilled nursing facilities, physician practices, and third-party medical billing companies, among others –...
Read More
compliance risk assessments

Compliance Risk Assessments: The Foundation of Effective Compliance Programs

Guidance on accounting for share-based payment awards is clear...unless it isn't. The Financial Accounting Standards Board (FASB) offered advisement on this very topic in its Accounting Standards Codification (ASC), Compensation—Stock...
Read More

Share-Based Payment Awards: An Update on Modification Accounting

The growing popularity of companies like Airbnb and Vacation Rentals By Owner (VRBO), has many Americans considering renting out their homes, or even specific rooms in their homes,  in hopes...
Read More

Tax Rules to Know When Renting Your Home

Securing fidelity bond coverage as part of your retirement plan is a step in the right direction toward safeguarding your business from mishandled funds, mismanagement, and abuse. Further, it is...
Read More

The Importance of Fidelity Bond Coverage in Your Retirement Plan

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

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