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Category: Tax Questions

Small Business Health Care Tax Credit

The Small Business Health Care Tax Credit which was enacted in 2010 as part of the Affordable Care Act, enables small business owners/employers that provide health insurance coverage to their employees to claim a credit on their tax return if they qualify.  Eligible employers can claim the credit for 2010 through 2013 and for two additional years beginning in 2014.

For 2010 - 2013, the maximum credit is 35 percent of premiums paid by eligible small businesses and 25 percent of premiums paid by tax-exempt organizations.  In 2014, the maximum rate rises to 50 percent for small businesses and 35 percent for tax-exempt organizations.  Small employers that pay at least half of the premiums for employee health insurance coverage under a qualifying arrangement may be eligible for the credit.

Eligible small employers can use Form 8941 to figure the credit.  An eligible small employer is an employer meeting all three of the following requirements for the tax year:
  • Paid premiums (not less than 50% of the premium cost) for employee health insurance under a qualifying arrangement.
  • Had fewer that 25 full-time equivelent employees (FTEs) for the tax year.
  • Paid average annual wages for the tax year of less than $50,000 per FTE.
To access Form 8941 in TaxSlayer Pro, from the Main Menu of the tax return select:
  • Credits Menu
  • General Business Credit - 3800
  • Current Year General Business Credits
  • Form 8941
Line 1 - Enter the number of employees who are considered qualifying employees for purposes of the credit.  See page 5 of Form 8941 Instructions to determine whether an employee is considered an eligible employee or must be excluded.
Line 2 - Enter the number of full-time equivalent employees (FTEs) the employer had for the tax year.
Line 3 - Enter the average annual wages the employer paid for the tax year.
Line 4 - Enter the total employer premiums paid for the tax year.
Line 5 - Enter the total premiums that would have been entered on line 4 if the total premium for each employee equalled the average premium for the small group market in which the employer offered health insurance coverage.  (See page 7 of Form 8941 Instructions).
Line 6 - Is the employer a tax-exempt small employer?
Line 7 - Enter the total amount of any state premium subsidies paid and any state tax credits available to the employer for premiums included on line 4.  (See page 4 of Form 8941 Instructions for additional information).
Line 8 - Enter the number of employees included on line 1 for whom the employer paid premiums during the tax year for health insurance coverage under a qualifying arrangement.
Line 9 - Enter the number of full-time employees for whom the employer paid premiums during the tax year for health insurance coverage under a qualifying arrangement.
Line 10 - Enter the amount of any credit for small employer health insurance premiums from partnerships, S corporations, cooperatives, estates, and trusts.
Line 11 - Select the type of activity for which the credit applies.  (See page 9 of Form 8941 Instructions for additional information).



Additional links:
Instructions for Form 8941, Credit for Small Employer Health Insurance Premiums
Small Business Health Care Tax Credit on IRS.gov


Last Updated: 12/19/2017


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