The Small Business Health Care Tax Credit is available to small
employers that pay at least half of the premiums for single health
insurance coverage for their employees. It is specifically targeted to
help small businesses and tax-exempt organizations that primarily employ
moderate- and lower-income workers.
Small businesses can claim the credit for 2010 through 2013 and for any
two years after that. For tax years 2010 to 2013, the maximum credit is
35 percent of premiums paid by eligible small businesses and 25 percent
of premiums paid by eligible tax-exempt organizations. Beginning in
2014, the maximum tax credit will increase to 50 percent of premiums
paid by eligible small business employers and 35 percent of premiums
paid by eligible tax-exempt organizations.
The maximum credit goes to smaller employers –– those with 10 or fewer
full-time equivalent (FTE) employees –– paying annual average wages of
$25,000 or less. The credit is completely phased out for employers that
have 25 or more FTEs or that pay average wages of $50,000 or more per
year. Because the eligibility rules are based in part on the number of
FTEs, not the number of employees, employers that use part-time workers
may qualify even if they employ more than 25 individuals.
