Credit For Small Employers Who Offer Health Insurance

Small employers may be eligible to claim the credit to offset the costs of providing health insurance to employees for tax years beginning in 2010 through 2013.

An eligible small employer must meet all of the following:

1. No more than 25 full-time equivalent (FTE) employees.
2. Average annual wages of the employees may not exceed $50,000.
3. The employer must pay at least 50% of the premium cost of the health plan for each enrolled employee.

The maximum tax credit is 35% of the employer's eligible health insurance premiums for an employer who is not tax-exempt and 25% for a tax-exempt employer.

Special considerations –

The credit cannot exceed the total amount on income and Medicare tax the employer is required to withhold from employees' wages and the employer share of Medicare tax on employees' wages.

Also, the amount of premiums that can be deducted on the employer's income tax return is reduced by the amount of the credit.

Changes to the credit in 2014 and later –

The maximum credit will increase to 50% of premiums paid for small business employers and 35% for small tax-exempt employers.

To be eligible for the credit, a small employer must pay premiums on behalf of the employees enrolled in a qualified health plan offered through a Small Business Health Options Program (SHOP) Marketplace.

The credit will be available to eligible employer for two (2) consecutive tax years.