Small Business Health Care Affordability Tax Credits

Under the Affordable Care Act, small employers are not required to provide health insurance to their employees. However, many small employers plan to offer or continue to offer health insurance to their employees despite not being required to do so. An important factor in this decision has been the availability of the Small Business Health Care Affordability Tax Credits. Below are some of key components of the tax credit:

1.    The tax credits have been available since 2010. From 2010 to 2013, the available tax credits were:

  • Non-Profit Entity – 25% of employer contribution to employees’ health insurance premiums.
  • For-Profit Entity – 35% of employer contribution to employees’ health insurance premiums.

2.    The tax credit is available from 2014 to 2016. However, it is available only if the small business purchases an insurance product through the Small Business Health Options Program (SHOP) or from an insurance agent authorized to sell SHOP products.

  • Non-Profit Entity – 35% of employer contribution to employees’ health insurance premiums.
  • For-Profit Entity – 50% of employer contribution to employees’ health insurance premiums.The tax credit is available from 2014 to 2016. However, it is available only if the small business purchases an insurance product through the Small Business Health Options Program (SHOP) or from an insurance agent authorized to sell SHOP products.

3.    To qualify for a tax credit, the employer must meet the following requirements:

  • Have less than 25 employees;
  • Have average employee wages of less than $50,000; and
  • The employer must contribute at least 50% of health insurance premium costs.

4.    The maximum credit is available to employers with 10 or fewer full-time equivalent employees, who have average annual wages of $25,000 or less.

5.    The process to determine the number of employees, to calculate average wages and to apply the rules related to employer contributions can be complex. However, for some small employers, the ability to receive a tax credit of up to 50% of the employer’s contribution to the health insurance premiums of its employees can be significant.

To find out more about the Small Business Health Care Affordability Tax Credits and the impact the Affordable Care Act has on health care and your business, contact attorney Michael James at mjames@michaeljameslaw.com, 810-936-4040 or www.michaeljameslaw.com. Michael James provides representation and counseling related to all facets of business enterprise and health care matters.

© 2014 Michael P. James, J.D., M.B.A., CSSGB

Comments are closed.