Small Employer Health Care Reform Tax Credit

A small employer may be eligible for a tax credit for providing health care coverage to employees. 

An employer with fewer than 25 full-time equivalent employees, that pays an average wage of less than $50,000 a year (as adjusted for inflation beginning in 2014), and pays at least half of its employees’ health insurance premiums may be eligible for a tax credit. 

For 2014 and later, the credit is 50% of premiums (35% of premiums for small tax-exempt employers). To be eligible for the credit, the employer must pay premiums for employees enrolled in a qualified health plan through the Small Business Health Options Program (SHOP). An employer may take advantage of the credit for two consecutive tax years. 

Small employers who did not owe tax during the year can carry the credit back or forward to other tax years.  The credit is refundable, so businesses with no taxable income may be eligible to receive the credit as a refund. 

Small employers should contact their tax advisors to see if the credit is available to them.

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