Small Business Health Care Tax Credit

If you are a small business or a tax-exempt organization, you should know that health coverage legislation enacted this year includes a Small Business Health Care Tax Credit to help small businesses and small tax-exempt organizations afford the cost of covering their workers.

See Small Business Health Care Tax Credit for Small Employers at

Eligibility Requirements:

  • You must provide health care coverage. A qualifying employer must cover at least 50 percent of the cost of health care coverage for some of its workers based on the single rate.
  • Maximum firm size. A qualifying employer must have less than the equivalent of 25 full-time workers (for example, an employer with fewer than 50 half-time workers may be eligible).
  • Average annual wage base. A qualifying employer must pay average annual wages below $50,000.
  • Both taxable (for profit) and tax-exempt firms qualify.

  Amount of Credit:

  • Maximum Amount. The credit is 50 percent of a small business’ premium costs (35 percent for tax-exempt employers).  The credit is available to eligible employers for two consecutive tax years.
  • Phase-out. The credit phases out gradually for firms with average wages between $25,000 and $50,000 and for firms with the equivalent of between 10 and 25 full-time workers.

 To Determine if Your Business May Qualify:

STEP 1: Determine the total number of your employees (not counting owners or family members): Full-time employees (enter the number of employees who work at least 40 hours per week) :
Add Full-time equivalent of part-time employees (Calculate the number of full-time equivalents by dividing the total annual hours of part-time employees by 2080.):
Equals Total Employees
If the total number of employees is fewer than 25, GO TO STEP 2.
+    ____________
=    ____________
STEP 2: Calculate the average annual wages of employees (not counting Owners or Family Members)
Take the total annual wages paid to employees:
Divide it by the number of employees from STEP 1 (total wages ÷ number of employees):
Equals Average Wages
If the result is less than $50,000, AND
÷    ____________
=    ____________
STEP 3: 
You pay at least half of the insurance premiums for your employees at the single (employee-only) coverage rate, then
You may be able to claim the Small Business Health Care Tax Credit.

If you have questions or need more information, please contact the Law Office of Tiffany L. Hamil.