Calculating and Claiming the Small Business Health Care Tax Credit

For tax years 2010 through 2013, the maximum health care tax credit was 35 percent of premiums for small business employers and 25 percent of premiums for small tax-exempt employers. For 2014 and later tax years, the maximum credit increased to 50 percent for small business employers and 35 percent for small tax-exempt employers.

For tax years before 2014, employers with more than 10 Full-Time Equivalents (FTE) or if the average wage was more than $25,000, the amount of the credit received was less than that of employers with fewer than 10 FTEs or an average wage of less than $25,000. The average wage has been adjusted for inflation to $25,400 for 2014 and $25,800 for 2015.

Small business employers that did not owe tax during the year can carry the credit back or forward to other tax years. Also, since the amount of the health insurance premium payments are more than the total credit, eligible small businesses can still claim a business expense deduction for the premiums in excess of the credit.

Small business employers that did not owe tax during the year can carry the credit back or forward to other tax years. Also, since the amount of the health insurance premium payments are more than the total credit, eligible small businesses can still claim a business expense deduction for the premiums in excess of the credit.

If you can benefit from the credit this year but forgot to claim it on your tax return, there’s still time to file an amended return. Refund limitations may apply. Generally, a claim for refund must be filed within 3 years from the time the return was filed or 2 years from the time the tax was paid, whichever of such periods expires the later, or if no return was filed by the taxpayer, within 2 years from the time the tax was paid.  Source:  IRS Small Business Health Care Tax Credit FAQs¹   

Calculating and Claiming Credit

IRS Small Business Health Care Tax Credit FAQs¹

 

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