Health Care Tax Credit

Starting in 2010, qualified small business employers who pay at least half of their employee’s health insurance costs may qualify for a tax credit of up to 35% of these costs.  In 2014, this maximum credit increases to 50 percent of premiums paid by eligible small business employers.

Qualified small business employers are generally employers with less than 25 full-time employees.

The credit is specifically targeted to help small businesses and tax-exempt organizations that primarily employ low and moderate income workers. It is generally available to employers that have fewer than 25 full-time equivalent (FTE) employees paying wages averaging less than $50,000 per employee per year. Because the eligibility formula is based in part on the number of FTEs, not the number of employees, many businesses will qualify even if they employ more than 25 individual workers.  The maximum credit goes to smaller employers — those with 10 or fewer FTEs — paying annual average wages of $25,000 or less.