Changes to Small Business Health Care Tax Credit

by: Bonfiglio & Asterita, LLC.
Bonfiglio and Asterita, LLC NY Attorneys at Law
Bonfiglio and Asterita, LLC NJ Attorneys at Law

Small businesses should be aware of changes to the small business health care tax credit for tax years beginning in 2014. Under the Affordable Care Act, this tax credit is available to eligible small employers that provide health care to their employees. Here’s a summary of the recent changes that may affect your business:

  • For 2014, the credit percentage increased from 35 percent to 50 percent of employer-paid premiums. For tax-exempt employers, the percentage increased from 25 percent to 35 percent.
  • Small businesses may claim the credit for only two consecutive taxable years beginning in tax year 2014 and beyond.
  • For 2014, the credit is phased out beginning when average wages equal $25,400 and is fully phased out when average wages exceed $50,800. The average wage phase-out is adjusted annually for inflation.
  • Generally, small businesses are required to purchase a Qualified Health Plan from a Small Business Health Options Program Marketplace to be eligible to claim the credit. Transition relief from this requirement is available to certain small employers.

Small employers may still be eligible to claim the tax credit for tax years 2010 through 2013. Companies that were eligible to claim this credit for those prior years — but did not do so — may consider amending prior years’ returns if they’re eligible to do so in order to claim the credit. Contact your tax pro for more information about the small businesses health care tax credit or assistance with completing Form 8941, Credit for Small Employer Health Insurance Premiums.

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