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Small Business Owners May Qualify for Tax Credit for Employees Health Care Premiums

  • The Patient Protection and Affordable Care Act signed into law on March 23, 2010 may allow you to take a tax credit for health care premiums you pay for your employees.  The tax credit is aimed specifically at small business owners with less than 25 full time employees and where the average annual wage per employee is less than $50,000.

    A for profit company may be eligible for as much as a 35% tax credit against the total health care premiums paid on behalf of the employees.  At more than 10 full time employees and at an average annual wage of greater than $25,0000 the amount of the tax credit that can be claimed is reduced.  At greater than 25 full time employees and/or greater than an average employee wage of $50,000, the tax credit is reduced to zero.

    A tax-exempt organization can take advantage of this credit as well and may be eligible for a tax credit of up to 25% of the health care premiums paid on behalf  of their employees.

    In 2014 the tax credit jumps to 50% for the for-profit companies and up to 35% for the tax-exempt organizations.  This guide has a more comprehensive summary of the highlights of this tax credit for the for-profit companies.