IRS Update: Changes to Small Business Health Care Tax Credit

Since 2010, the Small Business Health Care tax credit has been available to eligible small businesses that offer health insurance and have 25 or fewer employees. The purpose of this credit is to help small businesses pay for the premiums on health insurance for their employees.

The following changes have been made to this credit for tax years beginning in 2014:

• The maximum credit has increased to 50% of health insurance premiums paid.
• To be eligible for the credit, the small employer must purchase their health insurance through a Small Business Health Options Program (SHOP) offered through a health insurance exchange (marketplace).
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The credit will work with the new changes as follows:

• Credit is available to employers with 25 or fewer full-time equivalent employees whose average annual salaries are not more than $50,000.
• Credit is calculated on a sliding scale with a maximum credit of 50% of the employer's contribution toward their employees' health insurance premiums.
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An eligible employer claims the credit by completing Form 8941 (Credit for Small Employer Health Insurance Premiums) and including it with their federal return.

Click here to read the entire CrossLink Tax Update that includes further information on changes to the Small Business Health Care tax credit.