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 although 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.Back.
Wages, for this purpose, mean wages subject to Social Security and Medicare tax withholding determined without considering any wage base limit. If an individual is not considered an employee or is an excluded employee, his or her wages do not count. This includes:
Wages or compensation paid to ministers who are common-law employees for duties performed in the exercise of their ministry are not subject to FICA taxes and are not wages as defined in § 3121(a). So the wages of a minister who is a common law employee are not taken into account.
Short Taxable Year If an employer has a short taxable year, wages must be pro-rated (or annualized) in calculating the credit. For example, if a small employer has been in business (and paying premiums) for 6 months during its first taxable year, it must pro-rate the wages earned to reflect the 6 months the employer has been in operation.Back.
This is the state were the employee worked. It is used in calculating the State Average Premium Limitation
State Average Premium Limitation. 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.This table provides the average premium for the small group market in each state.
The following employers are treated as a single employer for purposes of calculating the credit:
For tax years 2010 through 2013, a household employer can qualify for the credit, even if he or she is not directly engaged in a trade or business.
A qualified employer outside the U.S. (including a U.S. territory) with income connected to a trade or business in the U.S. may claim the credit for tax years 2012 through 2013 if it pays for coverage issued in and regulated by the 50 states or the District of Columbia.
A section 521 farmers cooperative subject to tax under section 1381 is eligible for the credit as a taxable employer if it otherwise meets the definition of a qualified employer.
In general, all employees who perform services for you during the tax year are taken into account in determining your FTEs, average annual wages, and premiums paid. Rules that apply to certain types of employees are discussed below.
The following individuals are not considered employees for purposes of this credit. Do not count hours and wages of these employees and premiums paid for them when you estimate your credit.