Blog 06 11 13 – The Small Employer Health Insurance Premiums Tax Credit

The Small Employer Health Insurance Tax Credit (Code Sec. 45R) was created as part of the Patient Protection and Affordable Care Act, or more commonly referred to as “Obamacare”.  It is a tax credit of health insurance premiums paid by small employers.  This credit can be claimed on Form 8941 which needs to be included on the business tax return.

For tax years 2010 through 2013, small employers can receive up to 35% of premiums paid (maximum credit of $51,000), and tax exempt organizations up to 25% of premiums paid (maximum credit of $36,700).

For tax years 2014 through 2015, small employers can receive up to 50% of premiums paid (maximum credit $73,500), and tax exempt organizations up to 35% of premiums paid (maximum credit $58,800).

The amount of the credit per “Full Time Equivalent” (FTE) employees is capped at different amounts for different states.

To be eligible, a for-profit or not-for-profit small employer must; Employ fewer than 25 Full Time Equivalents, have average annual compensation of less than $50,000, and provide health insurance coverage for its employees.

When calculating FTE for purposes of the credit, owners, owners’ family, and seasonal employees who work fewer than 120 days are not considered.  However, the premiums for seasonal workers are included.

Employers who also employee household or non-business employees must also include them in the FTE count.

The definition for health insurance is: Benefits consisting of medical care (provided directly, through insurance or reimbursement, or otherwise) under any hospital or medical service policy or certificate, offered by a licensed health insurance company.

It can include dental or vision plans, long term care, nursing home plans, Medicare supplement, and others (please see IRS site for complete listing).

It does not include HSAs, HRAs, Credit-only insurance, coverage for on-site medical clinics, automobile medical payment insurance, coverage only for accident, or liability insurance.

For more information visit our website at www.dncpas.com or give one of our accountants a call at 239-261-8337. Davidson and Nick CPAs has been serving Southwest Florida in helping individuals and businesses as CPAs and most trusted advisor since 1989.