Thursday, February 26, 2015

Changes to Small Business Health Care Tax Credit

Small employers should be aware of changes to the small business health care tax credit, a provision in the Affordable Care Act that gives a tax credit to eligible small employers who provide health care to their employees.

Beginning in 2014, there are changes to the tax credit that may affect your small business or tax-exempt organization:
  • 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 employers 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 employers 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.   Employers who 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. 
The following information will assist you in completing Form 8941, Credit for Small employer Health Insurance Premiums.
  • SHOP QHP documentation or letter of eligibility from SHOP, unless transition relief applies
  • Numbers of full-time and part-time employees and numbers of hours worked
  • Average annual wages for employees
  • Employer premiums paid per employee, if applicable
  • Relevant K-1s and other pass-through credit information
  • Cost of coverage for each employee
  • Payroll tax liability – for tax-exempt organizations only
  • Pass-through credit info – for K-1s of other small employers
For more information about the Affordable Care Act and filing your 2014 income tax return, visit


Brittany Walters said...

Hi there! I'm so glad that I found your informative blog. I guess you can help me to find trusted accountants for my business financial problem. I hope to hear it from you. Thanks!

Kenneth Reid said...


I won't say that I can "definitely" help you with your business financial problems. It depends on the kind of problems you are having. I can possibly help you with accounting, bookkeeping, payroll, and income tax issues (again, depending on the types of issues you are having in these areas).

I provide accounting, bookkeeping, income tax planning and preparation, and payroll services to clients in the United States (in all 50 states). I can take a look at your current (QuickBooks) accounting software and see if it needs to be cleaned up. If the software is not able to be cleaned up, I can help you to set up a new, clean accounting data file (based on the most recent tax return filed for your business, and with a good trial balance that was used in the preparation of the tax return).

Contact me privately if you are interested in any services that I might be able to provide to you.