The Affordable Care Act includes the Small Business Health Care Tax Credit, which can benefit small employers who provide health coverage for their employees. Taxpayers who own small businesses might claim a general business credit on the personal returns when meeting specific criteria. The Small Business Health Care Tax Credit benefits employers that have fewer than 25 full-time equivalent employees pay average wages of less than $53,000 a year and pay at least 50 percent of the health care premium. The health insurance premium must be through a Small Business Health Options Program (SHOP) Marketplace.

The maximum credit is 50 percent of premiums paid for small business employers and 35 percent for small tax-exempt employers. The amount of the credit works on a sliding scale, which means the lower the employers, the bigger the credit. The cut-offs for calculating receiving the maximum credit are ten full-time equivalent employees or $25,000 average wage paid annually.

The credit can be carried back or forward to other tax years if taxpayers do not owe tax during the year. The credit is refundable if taxpayers are tax-exempt and have no taxable income.

The taxpayers need to file Form 8941, Credit for Small Employer Health Insurance Premiums, to calculate the credit. For small business owners, the credit is part of the general business credit on the income tax return. Tax-exempt organization owners can claim the credit on line 44f of the Form 990-T, Exempt Organization Business Income Tax Return.

For more information on this credit, please contact Abacus CPAs at or 417-823-7171. Better Guidance. Smarter Decisions.


Shuhan Gu, CPA