Transamerica Institute

Small Business Affordable Care Act Tax Credits

As a small business owner, with less than 50 employees, you may qualify for a tax credit if you purchase health insurance for your employees.  This tax incentive is designed to help  offset your contribution to your employee’s premium payment.  Businesses with fewer than 25 full time employees who are paid an average annual salary of $50,000 or less may qualify, for example ($1.25 million in total for 25 employees). In order to qualify you must purchase insurance through the Small Business Health  (SHOP) and you must pay at least 50% of your employee’s premium costs.  The credit will be available to eligible employers for two consecutive taxable years. The average credit is $752 per employee and the maximum credit is $1000 per employee. 

The table below illustrates the two phases of tax credits to help employers — including tax-exempt employers — with fewer than 25 full-time equivalent employees cover health care  premium costs.

 

Tax Year(s)

Maximum Tax Credit for Businesses as a Percentage of Health Insurance Premium Contribution

Maximum Tax Credit for Tax-Exempt Organizations as a Percentage of Health Insurance Premium Contribution

Phase One

2010–2013

35%

25%

Phase Two

2014

50%

35%


 

Grants for Wellness Programs

Small businesses with fewer than 100 employees who work 25 or more hours per week on average that did not have a workplace wellness program in effect as of March 2010 are eligible for grants to start such programs.  The grants will be available over five years to these businesses.

To qualify, wellness programs must be available to all employees and include the following: 

  • Health awareness initiatives, such as health education, preventive screenings and health risk assessments 
  • Efforts to maximize employee engagement and encourage participation 
  • Initiatives to change unhealthy behaviors and lifestyle choices (such as seminars, counseling, online programs and self-help materials) 
  • Supportive workplace efforts, including policies to encourage healthy lifestyles, healthy eating, increased physical activity and improved mental health. 

Employers can apply for the grants directly at www.healthcare.gov

In addition, beginning in 2014, employers may offer employees incentives of up to 30% of the cost of their coverage if they participate in the workplace wellness program and meet employer-defined health targets.