Small Business Tax Credits

Health Care Reform Help is Here, Get Started

Small businesses that offer health insurance to their employees can find much-needed relief through small business tax credits. If you already offer health coverage to your employees, you may qualify for a credit to offset the cost of premiums. If you don’t currently offer health insurance, the tax credit may help you afford it.

Any credit will be applied against taxes owed beginning with the 2012 employer’s annual income tax return. Small businesses can receive the credit for regular health insurance, add-on dental, and vision coverage.

The due date to claim this credit is dependent on the business tax year end date and type of business.

Tax credits are effective in two phases:

 Phase 1: 2010 – 2013Phase 2: 2014 and Later

Tax-Exempt Small Businesses

Full credit equals 25 percent of the lesser of the employer's current health insurance contribution or potential contribution toward a plan in the region.

Full credit equals 35 percent of employer's health insurance contribution. Open only to small businesses that offer coverage to employees through the Small Business Health Options Program (SHOP).

Non-Tax-Exempt Small Businesses

Full credit equals 35 percent of the lesser of the employer's current health insurance contribution or potential contribution toward a plan in the region.

Full credit equals 50 percent of employer’s health insurance contribution. Open only to small businesses that offer coverage to their employees through SHOP.

Eligible employers are those who:

  • Have fewer than 25 full-time equivalent employees.
  • Pay average annual wages of less than $50,000 (as adjusted for inflation beginning in 2014).
  • Contribute at least 50 percent of the total health care insurance premium cost for each enrolled employee.*

Note: Due to the automatic budget cuts to the federal budget, which began March 1, 2013 (also known as the sequester), this tax credit is reduced by 8.7 percent. This cut will be applied until the end of the fiscal year (September 30, 2013) or intervening Congressional action, at which time the sequestration rate is subject to change.

*Based on single coverage only.