Health Insurance Tax Credits for Small Business Employers

Did you know that owners of a small business who subsidize the cost of health insurance premiums for their employees are eligible to claim a credit when filing their taxes? In fact, small business owners can claim this credit for small employer health insurance premiums and possibly get some cash back during tax season.

Although there are some eligibility requirements, qualifying as a small employer can reduce your tax bill by the amount of the credit reported.

Filing Form 8941

When filing Form 8941, employers can receive a maximum credit of up to 50% of their paid premiums for small business employers and up to 35% of paid premiums for small tax-exempt employers.

Although these credits can be applied when filing, it’s important to keep in mind that you are only allowed to include the premiums for health insurance coverage which was obtained through the Affordable Care Act (Small Business Health Options Program). This credit can be applied for only two consecutive years.

Eligibility Requirements

To be considered as an “eligible small employer” you must meet the following criteria to take advantage of the tax credit for small employer health insurance premiums:

  1. At least 50% of enrolled employee’s insurance premiums are covered
  2. Your company has 24 or less full-time equivalent employees (FTE)
  3. The average annual salary of your FTE employees is less than $50,000

Full-Time Employees

While the requirements state that you must have 24 or fewer FTEs, you will still be eligible to receive the credit even if you have up to 48 part-time employees who work 20 hours each week, which would equate to the maximum of 24 FTEs. Essentially, two part-time employees are equivalent to one full-time employee.

Shhh…here’s a little secret! The IRS allocates 2,080 hours per year (40hrs./week for 52 weeks) to each FTE. If you base the total hours of service for all of your employees who worked during the year, you will discover that there are 10+ FTEs employed by your company. Because of this, your credit will begin to be reduced and you will not be given the maximum credit.

We’re Here To Help

As a small business owner, we realize that there are many areas of your company that require detail and attention. The services offered by TaxBandits allow you to complete your Affordable Care Act (ACA) reporting and e-filing needs directly to the IRS with a simplistic filing process. Providing multiple tax year support, postal mailing, and even a full-service option, TaxBandits is sure to be an e-filing software that you can trust!

Visit our website at to create a free account to complete and transmit ACA forms for your business online. Have a few questions or need some assistance while filing? No problem. Our US-based support team is here to help you every step of the way. We’re available over the phone Monday – Friday from 9 AM to 6 PM EST at 704.684.4751. We also offer live chat and you can take advantage of our 24/7 email support at

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