Under health care reform, certain small employers can receive a tax credit of up to 35% of the health insurance premiums they pay for employees. To qualify for the tax credit, employers must have less than 25 full-time-equivalent employees, pay salary of less than $50,000 on average per employee, and pay at least 50% of the premium for the qualifying health insurance. The credit amount varies based on number of employees.
Changes to the tax credit are planned for the 2014 tax year. The credit will be available only to those employers that provide health insurance coverage to their employees through the Small Business Health Options Program of the Exchange (“SHOP). The credit will increase to a maximum of 50% (35% for tax-exempt entities), and the dollar amount of salary will be indexed for inflation. The credit can be used only in two consecutive tax years (which may be retroactive or forward). Employers who plan to purchase coverage for their employees through SHOP should be sure to review the tax credit parameters to see if the credit is available.
