Rules For Claiming Credit

Claiming Credit Guidelines for Small Businesses

Under the Affordable Care Act, or ACA, small employers are able to benefit from a tax credit that allows them to provide health insurance coverage for employees. There are strict guidelines that small businesses have to follow in order to be eligible for health care tax credits, including:

  • Having 25 or fewer full time or equivalent employees.
  • Paying average annual salaries of less than $50,800 per each full time or equivalent employees.
  • Paying at least half of employee’s health insurance premiums.

In order to claim the credit, employers must cover at least 50 percent of the cost of a single health insurance plan. Keep in mind that employers only have to cover the cost of one individual’s insurance policy, not the cost of a family plan. An employer has to pay at least 50 percent of the self-only premium for every employee who is enrolled in a qualified health insurance plan through a SHOP Exchange.

Under the qualifying rules, two half time employees can count as one full time employee. Which means if your small company has 20 half time employees, it is equivalent to having 10 full time employees, which makes the number of full time or equivalent employees equal to 10, not 20.

In order to calculate the credit that they qualify for, small businesses must use the IRS Form 8941, also known as the Credit for Small Employer Health Insurance Premiums. The amount that small businesses qualify for can be included as part of the general business credit on the income tax return of the business.

For all of your health insurance needs and to ensure that your small business is able to claim the right amount of credit, contact Pacific Group. With locations in Laguna Hills and Palos Verdes Estates, California, we can help with all of your health insurance needs.