The Small Business Health Care Tax Credit is designed to help eligible small employers offset the cost of providing health insurance to their employees.
If your business qualifies, you may be able to claim a tax credit of up to:
- 50% of the health insurance premiums paid for employees, or
- 35% of the premiums paid if you're an eligible tax-exempt employer.
Because tax credits reduce your tax liability dollar-for-dollar, this credit can provide meaningful savings for small business owners who offer health coverage.
Who Qualifies for the Small Business Health Care Tax Credit?
To qualify for the credit, your business must meet all of the following requirements:
1. Have Fewer Than 25 Full-Time Equivalent Employees
Your business must employ fewer than 25 full-time employees or full-time equivalent (FTE) employees during the tax year.
2. Pay Average Annual Wages Below the IRS Threshold
The average annual wages paid to employees must be below the IRS's inflation-adjusted limit for the tax year.
3. Offer Coverage Through the SHOP Marketplace
You must offer a qualifying health insurance plan through the Small Business Health Options Program (SHOP) Marketplace, unless you qualify for a limited IRS exception to this requirement.
4. Pay at Least 50% of Employee-Only Coverage
You must pay at least 50% of the premium cost for employee-only health insurance coverage for each eligible employee.
The requirement applies to employee-only coverage and does not require you to pay 50% of family or dependent coverage.
Why This Credit Matters
Health insurance can be one of the largest expenses for a small business. The Small Business Health Care Tax Credit helps reduce the cost of providing coverage and may make it more affordable to offer benefits that help attract and retain employees.
Since this is a tax credit rather than a deduction, it directly reduces the amount of tax you owe.
How Do I Enter the Credit in the Program?
To enter information for the Small Business Health Care Tax Credit:
- Go to Federal
- Select Deductions
- Choose Select My Forms
- Open Credits
- Select Small Employer Health Insurance Premiums
The program will use the information entered to help calculate the credit and complete the applicable forms.
Additional Information
For more details about eligibility requirements and calculations, review:
These resources can help you determine whether your business qualifies and estimate the potential value of the credit.