Small Business Tax Credit Calculator for Health Insurance

What is the Small Business Health Care Tax Credit?

The Small Business Health Care Tax Credit is a refundable tax credit available to small businesses that provide health insurance to their employees. It was created to help small businesses afford the cost of offering health insurance, which can be expensive. The credit is available for tax years 2010 through 2013, and the amount of the credit depends on the size of your business and the number of full-time equivalent employees.

How the Credit Works

The credit is calculated based on the amount of payroll taxes your business paid for health insurance coverage and the number of full-time equivalent employees. The credit is available for up to 35% of the premiums paid for health insurance coverage.

Key Points

• The credit is refundable, meaning you can receive the credit even if you don't owe any taxes.
• The credit is available for tax years 2010 through 2013.
• The credit is available to businesses with 25 or fewer full-time equivalent employees.
• The credit is available to businesses that provide health insurance to their employees.

Eligibility Requirements

To qualify for the Small Business Health Care Tax Credit, your business must meet the following requirements:

Business Size

Your business must have 25 or fewer full-time equivalent employees. A full-time equivalent employee is defined as an employee who works an average of 30 hours per week.

Health Insurance Coverage

Your business must provide health insurance coverage to its employees. The coverage must be offered on a group basis and must meet certain minimum standards.

Tax Year

The credit is available for tax years 2010 through 2013. The credit is not available for tax years after 2013.

How to Calculate Your Credit

The Small Business Health Care Tax Credit is calculated using the following formula:

Where:

• Payroll Taxes is the amount of payroll taxes your business paid for health insurance coverage.
• Number of FTE Employees is the number of full-time equivalent employees your business has.

The credit is capped at 35% of the payroll taxes paid for health insurance coverage. The credit is also reduced if your business has more than 25 full-time equivalent employees.

Worked Example

Let's say your business has 20 full-time equivalent employees and paid $100,000 in payroll taxes for health insurance coverage. To calculate your credit:

1. Multiply the payroll taxes by 35%: $100,000 × 0.35 = $35,000
2. Divide the result by the number of FTE employees divided by 25: $35,000 × (20 / 25) = $28,000

Therefore, your business would qualify for a Small Business Health Care Tax Credit of $28,000.