4 Requirements to Receive the Small Business Health Care Tax Credit

Do You Qualify for the Small Business Health Insurance Tax Credit?

As a small business owner, you want to save money whenever possible while also taking care of your employees. Receiving the small business Small Business Health Care Tax Credit may be the only way you can afford to offer group insurance. Most small businesses may receive up to 50 percent of the premiums they pay, excluding non-profits which can get up to 35 percent. Either way, that’s a huge amount of money to get back. Here are the four requirements you must meet to qualify for the tax credit.

​1. You Have Fewer Than 25 Full-Time-Equivalent Employees
 
You may be wondering what full-time-equivalent (FTE) means. Generally, one FTE comes out to 2,080 hours worked per year. This means two half-time employees count as one FTE. According to the IRS, there are some workers you can exclude from your calculations, including:

• Seasonal employees who work no more than 120 days per year
• Owners of more than 5 percent of the business
• Shareholders owning more than 2 percent of an S corporation
• Partners in a partnership
• Sole proprietor

 
Keep in mind that the requirement for full-time employees, in this case, is different than other Affordable Care Act provisions that view anyone who works 30 hours weekly as an FTE.
 
2. Your Employees’ Average Salary is $53,000 or Less
 
This part can be confusing because it changes every year. The salary changes every year due to inflation. Be aware that the amount was $52,000 for tax year 2016, but it’s bumped up to $53,000 for tax year 2017. Figuring out your annual wage is easy–simply divide the total wages by the number of FTEs. For example, if you have 20 FTEs and pay out a total of $300,000, your average wage would be $15,000.
 
3. You Provide An Approved Group Plan to Your Full-Time Workers
 
To receive the tax credit, you must offer coverage through the Small Business Health Insurance Health Options Program (SHOP) Marketplace. Certain businesses can enroll for SHOP plans any time of the year. The agents at Sackett & Associates Insurance Services can help you purchase a SHOP plan that’s right for you.
 
4. You Cover at Least Half of Employee Premiums
 
Another important piece of criteria is if you pay at least 50 percent of employee health care coverage. This doesn’t mean you need to pay at least 50 percent of dependent or family coverage. 

Learn how Sackett & Associates Insurance Services can help you offer employee benefits and receive the tax credit.