Know Your Options As An Employer

The Affordable Care Act makes provisions for a small business health care tax credit, which can be used to benefit small employers who provide health coverage for their staff.

The small business health care tax credit is designed to assist employers who:

  • have less than 25 full-time equivalent employees
  • pay less than $51,600 per year
  • pay at least half of employee health insurance premiums

These are some of the highlights that will provide insight on this tax credit and how it will impact your small business or tax-exempt organization:

  • The credit percentage is 50% of the employer-paid premiums; for employers who are tax-exempt, the percentage is 35%.
  • Small employers have the option to claim the credit for two consecutive taxable years starting in 2014 and future years.
  • For the year 2015, the credit is phased out starting when the average wages equal $25,800 and is fully phased out when the average wages are greater than $51,600. The average wage is adjusted each year for inflation.
  • Typically, small employers must purchase Qualified Health Plan from a Small Business Health Options Program Marketplace in order to qualify for the credit. Transition relief is available to some small employers.

Small employers may still have the option to claim the tax credit for the years before 2014. Employers who had the option to claim this credit for the previous years - but did not take advantage of this option - may still opt to amend tax returns from previous years for the purposes of claiming the credit.

Here’s how to compile the information that is required to complete Form 8941, Credit for Small Employer Health Insurance Premiums.

  • SHOP QHP documentation or letter of eligibility from SHOP, the employer is eligible for transition relief
  • The number of part-time and full-time employees and the number of hours that were worked
  • Employee average annual wages
  • Employer premiums that were paid for each employee, if applicable
  • K-1s and other information regarding pass-through credits
  • Employee coverage costs
  • Payroll tax liability (required for tax-exempt organizations only)
  • Pass-through credit info - for K-1s of other small employers

For additional information regarding how the Affordable Care Act impacts your small business, please contact us at (513) 713-1152 for a convenient appointment.