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Is my small business eligible for a health insurance tax credit?

Government and compliance

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As a small business, you want to attract and retain top talent. But you also know how costly it can be to offer a competitive benefit package. You should know that the Affordable Care Act (ACA) offers a significant tax credit to small employers who meet certain criteria.

If you qualify, the Small Business Health Care Tax Credit may be worth up to 50 percent of the costs you pay for your employees’ premiums, or 35 percent if you are a non-profit employer.

To qualify for the tax credit, you must meet all the following criteria:

  • You have fewer than 25 full-time equivalent (FTE) employees.
  • Your average employee wage is about $56,000 per year or less.
  • You pay at least 50% of your full-time employees’ premium costs.
  • Your small business must purchase an Affordable Care Act (ACA) plan through a private insurer like Blue Cross and Blue Shield of Kansas.
  • You must offer the ACA plan to all your full-time employees. (You don’t have to offer it to dependents or employees working fewer than 30 hours per week to qualify for the tax credit.)

Get started by calculating your tax credit

Generally, the amount of your small business tax credit depends on how much of the premium you pay, how many employees you have, and the average salary of your employees.

The smaller your business, the larger your tax credit may be. The tax credit is highest for companies with fewer than 10 employees who are paid an average of $27,000 or less.

To find out exactly how much your business may qualify for, use the Small Business Health Care Tax Credit Calculator.

If your small business is not eligible for health insurance tax credits, you may be able to deduct the cost of contributing to employees’ monthly premiums as a business expense on your federal taxes.

We’re here for you.

If you have any questions about the tax credit, consult with your tax advisor.

Our Small Group Account specialists will help answer your health insurance questions and walk you through the process. Call us at 866-584-0171, Monday through Friday, 8 a.m. to 4:30 p.m. Or, email your questions to [email protected].