with fewer than 25 full-time equivalent employees,
that pays an average wage of less than $50,000 a year, and
pays at least half of your employee health insurance premiums…
How will the tax credit make a difference for you?
Small businesses that purchase coverage through Covered California for Small Business may be eligible to receive a federal tax credit to help offset the cost of providing health insurance. The amount of credit you are eligible to receive works on a sliding scale. The smaller your business and/or the lower your annual average wage, the larger your credit will be.
Here’s how it can help:
Can you claim the tax credit?
To be eligible for the federal tax credit…
What is a Full-Time Equivalent Employee?
For the purposes of determining whether an employer is a small or large employer as defined by the Affordable Care Act and applicable California law, the employer is required to calculate its total number of “Full-time Equivalent” (FTE) employees.
An FTE employee is not an actual employee, but a calculation involving all part-time and full-time employees who worked during the preceding calendar year or who are reasonably expected to work in the current calendar year if the employer did not exist in the prior year.
Employers are responsible for calculating their total FTE employees and should use the Full-Time Equivalent Calculator available at Healthcare.gov to arrive at this number.
To calculate and file the federal small business tax credit, you must use IRS Form 8941, Credit for Small Employer Health Insurance Premiums. For detailed information on completing the IRS Form 8941, see the accompanying Instructions.
If you are a tax-exempt organization, you must also file IRS Form 990-T, Exempt Organization Business Income Tax Return. This form must be filed with the IRS, in order to claim the tax credit, even if you would not ordinarily do so. For detailed information on filling out IRS Form 990-T, see the accompanying Instructions.
Note that this tax credit calculator is only an estimate of your actual tax credit.
Employers are encouraged to consult with their tax professional and the instructions provided by the IRS for additional information on applying and calculating actual amounts.