Small Group Tax Credit

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While not very popular, companies with up to 25 EEs and $50k in wages can get a tax credit.

Overview

This Affordable Care Act creates a tax credit to help small businesses and small tax-exempt organizations afford the cost of covering their employees and is specifically targeted for those with low- and moderate-income workers. The credit is designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have. In general, the credit is available to small employers that pay at least half the cost of single coverage for their employees.

For tax years 2010-2013, the maximum credit is 35% (25% for non-profits). Beginning in 2014, the maximum credit increases to 50% (35% for non-profits) but is only available for two years and only if purchased through the SHOP exchange. However, the SHOP exchange has been postponed until November 2014, so this requirement will not apply until that time.

The maximum credit is generally for companies with 10 or fewer full-time equivalent employees and $25,000 or less in average wages. It phases out completely at 25 full-time equivalent employees or $50,000 in average wages.

Source: IRS.gov Affordable Care Act Tax Provisions

Regulations and Guidance

IRS Web Page on Small Business Tax Credit
Resource page for small employers that may qualify for the small business tax credit
Proposed Rules: Tax Credit for Employee Health Insurance Expenses of Small Employers
This document contains proposed regulations provide guidance on the tax credit available to certain small employers that offer health insurance coverage to their employees under section 45R of the Internal Revenue Code. (08/26/2013)

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