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Small Business Health Care Tax Credit


Federal Internal Revenue Service

The Small Business Health Care Tax Credit provides a tax break to small businesses that provide health care coverage to their employees. Businesses with fewer than 25 full-time employees, with average wages under $50,000 a year, are eligible.

The credit is part of the Patient Protection and Affordable Care Act. The act encourages small businesses to offer health insurance coverage.

The maximum credit is equal to 50% of health care premiums paid by eligible small businesses and 35% for tax-exempt organizations. 

To be eligible for the credit, small business employers must meet all of the following criteria:
  • Have fewer than 25 FTEs for the tax year;
  • Pay less than $50,000 per FTE in average annual wages;
  • Pay the premiums under a “qualifying arrangement,” in which the employer pays premiums for each employee enrolled in health care coverage offered by the employer in an amount equal to a uniform percentage (not less than 50 percent) of the premium cost of the coverage.

Internal Revenue Service

Taxpayer Assistance Center

290 Broadway

New York NY 10007
Phone (212) 4361000
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