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The Small Business Health Care Tax Credit

- Estimator

Employer
Plans
Your Credit

- Employer Information

  • What is the total amount you paid out-of-pocket for your eligible employees' insurance?
  • What is the total amount of state subsidies and / or tax credits you received for your eligible employees' insurance coverage?
  • Information on your eligible employees:
    • How many of your employees worked 2,080 or more hours for you?
    • What are the total hours that all your other employees worked for you?
    • What are the total wages you paid to all your employees?
  • Are you an eligible tax-exempt employer?
  • Yes No
  • Do you have employees in more than one state?
  • Yes No
    • Please select your state:
    You will need to enter insurance plan information separately for each state. This will make the estimate of your credit more accurate. Please select the states in which you have eligible employees:

Glossary

State Subsidies and Tax Credits

Your credit may be reduced if you are entitled to a state tax credit or a state premium subsidy for the cost of health insurance coverage you provide under a qualifying arrangement to individuals considered employees. The state tax credit may be refundable or nonrefundable and the state premium subsidy may be paid to you or directly to your insurance provider.

Although a state tax credit or premium subsidy paid directly to you does not reduce the amount of your employer premiums paid, and although a state premium subsidy paid directly to an insurance provider is treated as an employer premium you paid, the amount of your credit cannot be more than your net premium payments. Net premium payments are employer premiums paid minus the amount of any state tax credits you received or will receive and any state premium subsides paid either to you or directly to your insurance provider for premiums for health insurance coverage you provide under a qualifying arrangement to individuals considered employees.

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Total Wages

Wages, for this purpose, mean wages subject to Social Security and Medicare tax withholding determined without considering any wage base limit. If an individual is not considered an employee or is an excluded employee, his or her wages do not count. This includes:

  • Wages paid to any seasonal employees who worked 120 or fewer days during the tax year; and
  • Wages paid with respect to the initial year of service on which leased employee status is based.

Wages or compensation paid to ministers who are common-law employees for duties performed in the exercise of their ministry are not subject to FICA taxes and are not wages as defined in § 3121(a). So the wages of a minister who is a common law employee are not taken into account.

Short Taxable Year If an employer has a short taxable year, wages must be pro-rated (or annualized) in calculating the credit. For example, if a small employer has been in business (and paying premiums) for 6 months during its first taxable year, it must pro-rate the wages earned to reflect the 6 months the employer has been in operation.

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Eligible Tax Exempt Employers

A tax-exempt small employer is an eligible small employer described in section 501(c) that is exempt from taxation under section 501(a). A tax-exempt employer not described in section 501(c) is generally not eligible to claim this credit. However, a tax-exempt farmers' cooperative subject to tax under section 1381 may be able to claim it as a general business credit. Back.
Payroll Tax Limitation for Tax-Exempt Small Employers

If you are an eligible tax-exempt employer, your credit cannot exceed the amount of certain payroll taxes. Payroll taxes, for this purpose, mean only the following:
  • Federal income taxes and Medicare taxes you were required to withhold from employees’ wages during the calendar year.
  • Medicare taxes you were required to pay for the calendar year.
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State

This is the state were the employee worked. It is used in calculating the State Average Premium Limitation

State Average Premium Limitation. Your credit is reduced if your premiums paid are more than the premiums you would have paid if your employees enrolled in a plan with a premium equal to the average premium for the small group market in the state in which your employee works.This table provides the average premium for the small group market in each state.


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Small Employers

Employers treated as a Single Employer

The following employers are treated as a single employer for purposes of calculating the credit:

  • Employers who are corporations in a controlled group of corporations (e.g., businesses with the same owners). See IRC section 414(b), (c), (m), and (o).
  • Employers who are members of an affiliated service group (e.g., related businesses where one performs services for the other). See IRC section 414(b), (c), (m), and (o).
  • Employers who are partnerships, proprietorships, etc., under common control. See Regulations sections 1.414(c)-2, 1.414(c)-3, and 1.414(c)-4 for details.
  • Tax-exempt employers under common control. See Regulations section 1.414(c)-5.

Household employers

For tax years 2010 through 2013, a household employer can qualify for the credit, even if he or she is not directly engaged in a trade or business.

Small employers outside the U.S.

A qualified employer outside the U.S. (including a U.S. territory) with income connected to a trade or business in the U.S. may claim the credit for tax years 2012 through 2013 if it pays for coverage issued in and regulated by the 50 states or the District of Columbia.

Farmers Cooperative

A section 521 farmers cooperative subject to tax under section 1381 is eligible for the credit as a taxable employer if it otherwise meets the definition of a qualified employer.

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The Average Annual Premiums for the Small Group Market in Each State and D.C.

State Self Family

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Which of My Employees Should Be Included?

In general, all employees who perform services for you during the tax year are taken into account in determining your FTEs, average annual wages, and premiums paid. Rules that apply to certain types of employees are discussed below.

Excluded employees.

The following individuals are not considered employees for purposes of this credit. Do not count hours and wages of these employees and premiums paid for them when you estimate your credit.

  • The owner of a sole proprietorship.
  • A partner in a partnership.
  • A shareholder who owns (after applying the section 318 constructive ownership rules) more than 2% of an S corporation.
  • A shareholder who owns (after applying the section 318 constructive ownership rules) more than 5% of the outstanding stock or stock possessing more than 5% of the total combined voting power of all stock of a corporation that is not an S corporation.
  • A person who owns more than 5% of the capital or profits interest in any other business that is not a corporation.
  • Family members or a member of the household who is not a family member but qualifies as a dependent on the individual income tax return of a person listed above. Family members include a child (or descendant of a child), a sibling or stepsibling, a parent (or ancestor of a parent), a stepparent, a niece or nephew, an aunt or uncle, or a son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law. A spouse is also considered a family member for this purpose.

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