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Small Business Health Care Affordability Tax Credits

Under the Affordable Care Act, small employers are not required to provide health insurance to their employees.  However, many small employers plan to offer health insurance coverage anyway. An important factor in this decision has been the availability of the […]


Under the Affordable Care Act, small employers are not required to provide health insurance to their employees.  However, many small employers plan to offer health insurance coverage anyway. An important factor in this decision has been the availability of the Small Business Health Care Affordability Tax Credits. Below are some of key components of the tax credit:

    1. The tax credits have been available since 2010.  From 2010 to 2013, the available tax credits were:
      1. Non-Profit Entity – 25% of employer contribution to employees’ health insurance premiums.
      2.  For-Profit Entity – 35% of employer contribution to employees’ health insurance premiums.
    2. The tax credit is available from 2014 to 2016.  However, it is available only if the small business purchases an insurance product through the Small Business Health Options Program (SHOP) or from an insurance agent authorized to sell SHOP products.
      1. Non-Profit Entity – 35% of employer contribution to employees’ health insurance premiums.
      2.  For-Profit Entity – 50% of employer contribution to employees’ health insurance premiums.
    3. To qualify for a tax credit, the employer must meet the following requirements:
      1. Have less than 25 employees;
      2. Have average employee wages of less than $50,000; and
      3. The employer must contribute at least 50% of health insurance premium costs.
    4. The maximum credit is available to employers with 10 or fewer full-time equivalent employees, who have average annual wages of $25,000 or less.
    5. The process to determine the number of employees, to calculate average wages and to apply the rules related to employer contributions can be complex.  However, for some small employers, the ability to receive a tax credit of up to 50% of the employer’s contribution to the health insurance premiums of its employees can be significant.

To find out more about the impact that the Affordable Care Act has on health care and your business, contact Health Care Department Chair Jonathan Raven at jraven@fraserlawfirm.com or 517.377.0816, or our Employee Benefits Department Co-Chair Elizabeth H. Latchana at elatchana@fraserlawfirm.com or 517.377.0826.

This blog is intended for informational and educational purposes only and not for the purpose of providing legal advice or soliciting legal business. You should contact your attorney to obtain advice with respect to any particular issue or problem. Use and access of this brochure does not create an attorney-client relationship. Circular 230 Disclosure: The following disclosure is required pursuant to U.S. Department of Treasury Circular 230 which sets forth best practices for tax advisors.  To the extent the above contains an opinion on one or more Federal tax issues such opinion was not written to be used and cannot be used for the purpose of avoiding penalties.  Nothing in this message or the typed name of the sender is intended to constitute an electronic signature unless a specific statement to the contrary is included in this message.