Did you know? If you are a small business, when you buy health coverage for your employees through the Small Business Health Options Program (SHOP) Marketplace, you may qualify for a tax credit worth up to 50% of your premium contributions. That’s great news for employers. Yet, many have not taken advantage of the program.
According to the IRS, a small employer may qualify for the credit if:
- It has fewer than 25 employees who work full-time, or a combination of full-time and part-time. (For example, two half-time employees equal one full-time employee for purposes of the credit.)
- It pays premiums on behalf of employees enrolled in a qualified health plan offered through a Small Business Health Options Program Marketplace or qualifies for an exception to this requirement.
- The average annual wages of full-time equivalent employees are less than $51,000. (The annual average wages will be adjusted annually for inflation.)
- It pays a uniform percentage for all employees that is equal to at least 50% of the premium cost of the insurance coverage.
By using the Full-Time Equivalent (FTE) Calculator, small employers can get help determining whether they are able to buy SHOP coverage for their employees. The SHOP Tax Credit Estimator allows small employers to find out the size of the tax credit they could get for contributing to coverage for their employees through the SHOP.
The IRS says there are some key things to know about the tax credit and applying for SHOP:
- Generally, the Small Business Health Care Tax Credit is available for eligible employers purchasing SHOP health plans.
- The tax credit will be available to eligible employers for two consecutive taxable years.
- The tax credit may be available to eligible tax-exempt employers who could receive up to 35% of employer premium contributions and can access the credit as a refund.
- Even if you’re a small employer who does not qualify for a small business tax credit, you may still purchase coverage through SHOP.
A small business employer who did not owe tax during the year can carry the credit back or forward to other tax years. And, since the amount of the health insurance premium payments is greater than the total credit claimed, eligible small employers can still claim a business expense deduction for premiums in excess of the credit.
Do you have questions about the health care tax credit? Contact Myerson & Myerson, CPA’s at (703)753-1040.
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Katherine Gotthardt is a published author and the CEO of All Things Writing, LLC. She blogs for Myerson and Myerson, CPA’s, as well as other organizations. Contact All Things Writing, LLC for more information on blogging services.