The Taxpayer Advocate Service developed the Small Business Health Care Tax Credit Estimator to help you find out if you might be eligible for the Small Business Health Care Tax Credit and how much you might receive.
If you are an eligible small employer, the Small Business Health Care Tax Credit can help you provide health insurance coverage to your employees. The credit can be up to 50% of the premiums you paid for health insurance coverage under a qualifying arrangement, or, if you’re an eligible tax-exempt employer, up to 35% of premiums you paid.
You are an eligible small employer for the tax year if you meet these three requirements:
- You paid premiums for employee health insurance coverage that you purchased through the SHOP Marketplace under a qualifying arrangement.
- The SHOP Marketplace is open to employers with 50 or fewer full-time equivalent employees (FTEs). This includes non-profit organizations.
- The FTE calculation for qualifying for the SHOP Marketplace is based on a 30-hour week unlike the FTE calculation for the credit, which is based on a 40-hour week.
- Exceptions to the SHOP requirement may apply in 2017 and later years. See the IRS News Release or Notice 2018-27 for more information.
- You had fewer than 25 full-time equivalent employees (FTEs) for the tax year. If some of your employees are part time, you may be able to meet this requirement even if you had 25 or more employees.
- The FTE calculation for eligibility for the credit is based on a 40-hour work week (2,080 hours divided by 52 weeks). To help determine if you are eligible for the credit and estimate the amount, the Estimator uses this 40-hour work week FTE calculation.
- If some of your employees are part time, you may be able to meeet this requirement even if you had 25 or more employees.
- The credit will begin to phase out if you have more than 10 FTEs.
- For 2017, you paid average annual wages for the tax year of less than $53,000.
- Wages, for this purpose, mean wages subject to Social Security and Medicare tax withholding determined without considering any wage base limit.
- The credit will begin to phase out if you paid average annual wages of more than $26,000.
- If an individual is not considered an employee or is an excluded employee, his or her wages do not count. Eligible employees and excluded employees are discussed in The Credit section.
For tax years 2014 and forward, the credit is only available to you for two consecutive years beginning with the first year you claim the credit. This does not include 2010 through 2013.
If you are a small business, include the amount as part of the general business credit on your income tax return.
If you are a tax-exempt organization, include the amount on your Form 990-T, Exempt Organization Business Income Tax Return. You must file the Form 990-T in order to claim the credit, even if you don't ordinarily do so.
The SHOP Marketplace is an online health insurance marketplace where you can shop for and purchase insurance to offer to your employees.
To get more information about the SHOP Marketplace and the eligibility requirements, visit Healthcare.gov.
This tool is intended to help small employers and practitioners determine if they are eligible for the credit and estimate the amount.
However, this estimator does not determine:
- Whether the health insurance coverage you offer is an eligible plan, nor
- Which of your employees are considered employees for purposes of determining the credit.
To use the estimator, you'll need certain information, including:
- Information about your employees (including total hours worked and total wages)
- Information about the insurance costs you pay on behalf of your employees
You can get more information and IRS resources at Small Business Health Care Tax Credit for Small Employers and from the Affordable Care Act Tax Provisions.