Do You Qualify For The Small Business Health Care Tax Credit?

If you offer health insurance to your employees, it can be costly, but luckily there is a silver lining- the small business health care tax credit! One of the provisions of the Affordable Care Act, ACA, is the Small Employer Health Care Tax Credit which allows certain businesses to save money while offering health insurance to their employees. While it is a great financial saver for businesses, not all businesses can get the tax credit. There are some qualifications that a small business must meet in order to get the health care tax credit.

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You must meet certain qualifications in order to receive a tax credit.


The Small Business Health Care Tax Credit

This credit allows small businesses to receive a tax credit for paying at least half of their employees health insurance premiums. In the beginning, the small business health care tax credit was not much, ranging only 35% of eligible health insurance premiums. But luckily, over the years it has changed. The tax credit now equates to up to 50% of employer-paid health insurance premiums. 

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The tax credit now equates to up to 50% of employer-paid health insurance premiums. 

Small business owners cannot take the tax credit for insurance premiums paid on their own behalf. This includes partnerships, and sole proprietors. 


In order to qualify for the health care tax, a business must meet the following criteria:

  1. Have fewer than 25 full-time employees.
  2. Your average employee salary must be less than $54,000 as of the 2019 tax year. 
  3. You pay at least 50% of your full-time employees health insurance premiums, also known as a “qualifying arrangement.”

Flexible Credit

An advantage of having this kind of credit is that it is flexible. It can be carried toward the next year, or back to other tax years. So, if your business does not owe tax in a certain year, then claiming the tax credit will not do you any good. However, if you owe tax for a prior year, you can apply your credit to that. Or you can choose to keep the tax credit and save it for next year.

Claiming the Tax Credit

The health care tax credit can be calculated and claimed using the Form 8941. The form must be attached to the business’s tax return, and then after it is processed, the credit reduces any income tax the business owes.

Tax-exempt organizations should file Form 990-T. This tax credit is non-refundable, although it can be carried towards either the following or prior tax years. Also, tax-exempt organizations that have no taxable income can qualify for a refund of the credit, as long as it doesn’t exceed their Medicare tax liability and income tax withholding.

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If your business does not qualify for the tax credit, there is still hope on saving money with tax deductions.

Small Business Tax Deductions

If your business does not qualify for the tax credit, there is still hope on saving money. There is a deduction for employee premium payments. Some businesses may be able to get both the deductions and tax credit!

The small business health care tax can help a small business offer their employees health insurance without fearing the great costs. As long as you meet the qualifications to receive the tax credit, then you will be eligible. The fewer employees you have, for example, less than 10 full-time employees who are paid an average of $25.000 or less will get you a bigger credit. And if you do not qualify for the tax credit, at least you can get deductions!

If you are looking to provide health insurance to your employees and want to save money, EZ.Insure can help. We will find a plan that meets your needs financially. We will find the plan that gives you deductions and notify you on whether you qualify for both deductions and the tax credit. Our goal is to save you as much money, while providing you with the best plan. Call 888-350-1890, or email us at to speak directly with one of our agents, or enter your zip code in the bar above to get free instant quotes. We will never sell your information to telemarketers as others do.

About The Author:
Cassandra Love

With over a decade of helpful content experience Cassandra has dedicated her career to making sure people have access to relevant, easy to understand, and valuable information. After realizing a huge knowledge gap Cassandra spent years researching and working with health insurance companies to create accessible guides and articles to walk anyone through every aspect of the insurance process.

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