The Small Business Health Care Tax Credit
Estimator
- The Credit
- The Estimator
- Information Needed
- Estimator Instructions
There are three basic requirements to be eligible for the Small Business Health Care Tax Credit. They are:
1. Qualifying Arrangement
You have to pay a uniform percentage - at least 50% - of the premium cost for each enrolled employee's health insurance coverage.
However, you don't necessarily have to pay 50% of the actual cost of the insurance - your share of premiums can be based on one of several things, such as the cost of self coverage or the cost of a reference plan.
Example
You pay 50% of the cost of self-coverage for all your employees. This leaves your employees who are enrolled in more expensive coverage - such as self plus one or family - to pay the additional cost.
Then, even though you pay less than 50% of the cost of self plus one and family coverage, you may still be eligible because you paid 50% of what would have been charged for self-coverage.
2. Fewer Than 25 Employees
You had fewer than 25 full-time equivalent employees (FTEs) for the tax year.
You may be able to meet this requirement even if you had 25 or more employees. Your FTEs are found by counting the total hours all your employees worked (also include paid time off such as vacation, military duty, etc.) for you during the year and dividing that by 2,080 (40 hours a week for 52 weeks a year). The result, rounded down to the closest whole number, is your FTEs.
Example
If you have 43 half-time employees who each worked 1,040 hours for the year, you have 21 FTEs:
| Total Hours all employees worked: | 44,720 |
| Divided by 2,080: | 21.5 |
| Rounded down, your FTEs: | 21 |
3. Less than $50,000 Average Wages
You paid average annual wages for the tax year of less than $50,000 per FTE.
Your average annual wages are found by dividing the total wages you paid for the year by the number of your FTEs. This result, rounded down to the nearest thousand, is your average annual wages.
Example
You paid a total of $273,598 to all your 43 half-time employees. Your average annual wages are $13,000
| Total Wages for the year: | $273,598.00 |
| Divided by 21 (your FTEs): | $13,028.48 |
| Rounded down, your average annual wages: | $13,000.00 |
For additional information about each of the requirements, see Notice 2010-44 and Notice 2010-82.