Small Business Health Care Tax Credit

IRS Health Care Tax Tip 2014-08, March 10, 2014

The Small Business Health Care Tax Credit helps small businesses and tax-exempt organizations pay for health care coverage they offer their employees.

A small employer is eligible for the credit if it has fewer than 25 employees who work full-time, or a combination of full-time and part-time. For example, two half-time employees equal one employee for purposes of the credit.

For 2013, the average annual wages of employees must be less than $50,000, and the employer must pay a uniform percentage for all employees that is equal to at least 50% of the premium cost of the insurance coverage.

The maximum credit is 35 percent of premiums paid for small business employers and 25 percent of premiums paid for small tax-exempt employers such as charities.

If you are a small business employer who did not owe tax during the year, you can carry the credit back or forward to other tax years.

For small tax-exempt employers, the credit is refundable, so even if you have no taxable income, you may be eligible to receive the credit as a refund so long as it does not exceed your income tax withholding and Medicare tax liability.

More information

Find out more about the small business health care tax credit at IRS.gov/aca.

The Small Business Health Care Tax Credit Estimator can help you find out whether you're eligible for the Small Business Health Care Credit and how much you might receive.

Find out more about the health care law at HealthCare.gov.