Phoenix CPA | Small Business Health Care Premium Tax Credit The news has been flooded with information on the Affordable Care Act lately, but little has been mentioned regarding the Small Business Health Care Premium tax credit. For tax year 2015, the maximum credit is 50 percent of premiums paid for small business employers. Small employers can qualify for the tax credit if they meet the following requirements: pay the premiums on behalf of employees enrolled in qualified health plans purchased via the Small Business Heath Options (SHOP) Marketplace, have fewer than 25 full-time equivalent (FTE) employees, have an average wage per FTE of $51,000 or less, pay the same percentage for all employees and pay at least 50 percent of the premium cost.
The credit is only available to eligible employers for two consecutive years. Employers can still be eligible for the credit even if they don’t offer health coverage to part-time (fewer than 30 hours per week) employees. Small business taxpayers can carry the credit back or forward if they have no tax due in the current year. The amount of the deduction for the health insurance premiums paid will be reduced by the amount of the tax credit claimed. For tax exempt small employers, the refund is refundable. Taxpayers will use IRS form 8941, Credit for Small Employer Health Insurance Premiums, to figure the credit. Since S-Corporations and Partnerships do not pay income tax, S-Corporation owners and Partnership partners will have the credit flow through to their personal tax returns via IRS form 3800, General Business Credit.
More information regarding the Small Business Health Care Premium Tax Credit can be found at the IRS’ website, irs.gov or the SHOP Marketplace, located on healthcare.gov. Healthcare.gov has a SHOP tax credit estimator and an FTE calculator to help you. If you have any further questions, don’t hesitate to contact us any time.