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ACA Small Business Health Care Tax Credit

At a glance

Under the ACA, businesses with 24 or fewer full-time-equivalent employees may qualify for a small business tax credit of up to 35 percent (25 percent for tax-exempt groups) to help them afford the cost of health care premiums. In 2014, the tax credit goes up to 50 percent (35 percent for tax-exempt groups) and is available to qualified small businesses that participate in the Exchange for small business.  Small employers can claim the credit through 2013 and for two additional years beginning in 2014.

The maximum credit will be available to employers with 10 or fewer full-time-equivalent employees and average annual wages below $25,000. Businesses that receive state health care tax credits may also qualify for the federal tax credit. Dental and vision care also qualify for the credit.

What you need to know

The ACA doesn’t require small businesses to offer health insurance. Businesses may qualify for the small business tax credit if they:

  • Have 24 or fewer full-time-equivalent employees for the taxable year (for example, two half-time employees equal one full-time employee for purposes of the credit).
  • Pay average annual wages below $50,000.
  • Contribute 50 percent or more toward employee health insurance premiums.

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