American Rental Association

Health Care Tax Credit Can Benefit Small Employers

The Affordable Care Act (ACA) may have some tax benefits for small businesses this tax season. The Small Business Health Care Tax Credit is available for small employers that have fewer than 25 full-time equivalent (FTE) employees, pay an average wage of less than $50,000 a year and pay at least half of employee health insurance premiums. The credit will be available to eligible employers for two consecutive taxable years and employers that can benefit from the credit this year but did not claim it on their tax return still can file an amended return.

For tax years 2010-2013, the maximum credit is 35 percent of premiums paid for small business employers. Small business employers who did not owe tax during the year can carry the credit back or forward to other tax years.

The rules change slightly starting with tax year 2014. The maximum credit will increase to 50 percent of premiums paid for small business employers. However, to be eligible for the credit in 2014 and beyond, a small employer must pay premiums on behalf of employees enrolled in a qualified health plan offered through a Small Business Health Options Program (SHOP) Marketplace.

Applicants must use Form 8941, Credit for Small Employer Health Insurance Premiums, to calculate the credit. For detailed information on filling out this form, see the Instructions for Form 8941.

To find out more about the Small Business Health Care Tax Credit and how to claim the credit, click here.

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