Intended to encourage small employers to offer health insurance to their employees, the Small Business Health Care Tax Credit provided a maximum tax credit of 35% of the employer’s premium payments made on behalf of employees in tax years 2010-2013. However, this credit amount will increase to 50% of the employer’s premium payments beginning in the 2014 tax year.
To be eligible for this tax credit, the employer must have fewer than 25 full-time equivalent employees making an average of about $50,000 a year or less, and must pay at least 50% of full-time employees’ premium costs. Beginning in 2015, only premiums paid by the employer for employees enrolled in a qualified health plan offered through a Small Business Health Options Program (SHOP Exchange) are counted when calculating the credit. While this part was originally set to apply beginning this year (2014), it has been extended for one year because the SHOP Exchange is delayed.