Small Business Health Care Tax Credits

Small Business Health Care Tax Credits
Eileen St. Pierre, The Everyday Financial Planner

The Small Business Health Care Tax Credit was created in 2010 to help small employers of lower wage workers afford a significant contribution to their workers’ premiums. In the 2011 tax year, 360,000 small businesses took advantage of this credit.

You may qualify for the Small Business Health Care Tax Credit if you have fewer than 25 full-time employees making an average of about $50,000 a year or less.

  • You must pay at least 50% of your full-time employees’ premium costs.
  • You do not need to offer coverage to your part-time employees or to dependents (i.e., family coverage).
  • Right now, the credit is worth up to 35% of an employer’s premium contribution (up to 25% for non-profits and tax‐exempt employers).
  • Starting in 2014, the tax credit is worth up to 50% of your contribution toward employees’ premium costs (up to 35% for non-profits and tax-exempt employers).
  • The tax credit is highest for companies with fewer than 10 employees who are paid an average of $25,000 or less. The smaller the business, the bigger the credit.

Here’s the catch – starting in 2014 the credit is available only if you get coverage through the Small Business Health Options Program (SHOP). You can only receive the credit for two years. These years do not need to be consecutive. If you have received the tax credit in the past, you can still get the credit for two more years once enrolling in SHOP.

[December 2013 Update:  Online enrollment in the SHOP program has been delayed for a year.  Use direct enrollment to qualify for the tax credits.]

The SHOP Call Center (1-800-706-7893) is now open from 9-5 (Eastern), Monday through Friday. Starting on October 1, the hours will increase to 9-7.

The IRS has more information about the credit at

Visit my Health Care Reform page for more information.