In certain circumstances, your credit may be reduced or eliminated. The limitations are:
Your credit is reduced if you had more than 10 full time equivalent employees (FTEs) during the tax year. If you had 25 or more FTEs for the tax year, your credit is zero.
However, you can still receive a credit from a partnership, S corporation, cooperative, estate, or trust (see the instructions for Form 8941).
Your credit is reduced if you paid average annual wages of more than $25,000 for the tax year. If you paid average annual wages of $50,000 or more for the year, your credit is zero. The average annual wages are calculated by dividing your total wages paid by your number of FTEs. You can still receive a credit from a partnership, S corporation, cooperative, estate, or trust (see the instructions for Form 8941).
Your credit is reduced if your premiums paid are more than the premiums you would have paid if your employees enrolled in a plan with a premium equal to the average premium for the small group market in the state in which your employee works. If the insurance coverage for any of your employees is more expensive than the state average, the limitation is calculated by assuming the employee would have been charged premiums equal to the state average and taking your percent share of that amount.
For 2011, you have an employee who worked in Montana and is enrolled in self-coverage. The premium is $6,870.20 annually. If you paid 50% of the cost - $3,435.10 - you can only count $2,461.50 as premiums you paid when figuring your credit because the average premium for self-coverage in Montana for 2011 is $4,923.00.
|Your share (50%) of the smaller of the two:||$2,461.50|
Your credit may be reduced if you are entitled to a state tax credit or a state premium subsidy for the cost of health insurance coverage you provide under a qualifying arrangement to individuals considered employees. The state tax credit may be refundable or nonrefundable and the state premium subsidy may be paid to you or directly to your insurance provider.
Although a state tax credit or premium subsidy paid directly to you does not reduce the amount of your employer premiums paid, and a state premium subsidy paid directly to an insurance provider is treated as an employer premium you paid, the amount of your credit cannot be more than your net premium payments. Net premium payments are employer premiums paid minus the amount of any state tax credits you received or will receive and any state premium subsides paid either to you or directly to your insurance provider for premiums for health insurance coverage you provide under a qualifying arrangement to individuals considered employees.
In other words, if you received state subsidies or tax credits for providing health insurance to your employees, your credit is limited to the amount you actually paid out of your own pocket.
If you're an eligible tax-exempt employer, your credit cannot exceed the amount of certain payroll taxes. Payroll taxes, for this purpose, mean only: