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|Issue Number: IRS Tax Tip 2015-37Inside This Issue
Don’t Overlook the Small Business Health Care Tax Credit
Do you own or run a small business or tax-exempt group with fewer than 25
full-time employees? If you do, you should know that the Small Business Health
Care Tax Credit can help you provide insurance to your employees. You may be
able to save on your taxes if you paid for at least half of their health
insurance premiums. Here are several things that you should know about this
If you are a for-profit business and the credit is more than your tax
liability for the year, you can carry the unused credit back or forward to other
tax years. If you are a tax-exempt employer, you may be eligible to receive the
credit as a refund. This applies so long as it does not exceed your income tax
withholding and Medicare tax liability for the year.
- Maximum Credit. For tax years beginning in 2014 and after,
the maximum credit is 50 percent of premiums paid by small business employers.
The limit is 35 percent of premiums paid by tax-exempt small employers, such as
- Number of Employees. You may qualify if you had 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.
- Qualified Health Plan. You must have paid premiums for
your employees enrolled in a qualified health plan offered through a Small Business Health Options Program, or SHOP,
Marketplace. There are limited exceptions to this requirement.
- Average Annual Wages. To qualify for the credit, the
average annual wages of your full-time equivalent employees must have been less
than $51,000 in 2014. The IRS will adjust this amount for inflation each year.
- Half the Premiums. You must have paid a uniform percentage
of the cost of premiums for all employees. The amount you paid must be equal to
at least 50 percent of the premium cost of the insurance coverage for each
- Two Year Limit. An eligible employer may claim the credit
for any two-consecutive taxable years, beginning in or after 2014. This credit
can be claimed for two consecutive years, even if you claimed the credit at any
point from 2010 through 2013.
- Tax Forms to Use. All employers use the Form 8941, Credit for Small Employer Health
Insurance Premiums, to calculate the credit. For-profit businesses claim the
credit on Form 3800, General Business Credit. Tax-exempt
organizations claim it on Form 990-T, Exempt Organization Business Income
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