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Group Health Insurance Tax Credits for Small Business Owners

If you own a small business employer (50 employees or less), you may be eligible to take advantage of one or more tax credits. Tax credits can put money back into your pocket and help you recoup your health insurance expenses. Below, we look at some of the tax credits you may receive. If you have any further questions about group health insurance or tax credits, feel free to contact Insurance Enterprise.

What Are the Tax Credit Guidelines?

The small business health care tax credit benefits employers that:


  • Have fewer than 25 full-time equivalent employees
  • Pay average wages of less than $50,000 a year per full-time equivalent
  • Offer a qualified health plan to its employees through a Small Business Health Options Program Marketplace (or qualify for a limited exception to this requirement)
  • Pay at least 50 percent of the cost of employee-only – not family or dependent – health care coverage for each employee


The maximum credit is:

  • 50 percent of premiums paid for small business employers and
  • 35 percent of premiums paid for small tax-exempt employers
  • The credit is available to eligible employers for two consecutive taxable years

How Do the Tax Credits Benefit Your Business?

Roll the Credit Back or Forward

If your small business does not owe tax during the year, you can carry the credit back or forward to other tax years. Since the amount of the health insurance premium payments is more than the total credit, you can still claim a business expense deduction for the premiums in excess of the credit.

The Credit is Refundable

If you’re tax-exempt and have no taxable income, you may be eligible to receive the credit as a refund so long as it does not exceed your income tax withholding and Medicare tax liability. 

You Can File an Amend Return

You can benefit from the credit this year or in previous years. If you didn’t claim it on your tax return, there’s still time to file an amended return. Keep in mind that a claim for refund must be filed within three years from the time the return was filed or two years from the time the tax was paid.

What About Full-Time Equivalents (FTEs)?

Full-time equivalent (FTE) indicates the workload of an employed person in a way that makes workloads or class loads comparable to actual full-time hours worked. FTE is often used to measure a worker’s or student’s involvement in a project or to track cost reductions in an organization.


You will consider all employees who perform services during the tax year when determining the number of your full-time equivalent employees, as well as average annual wages and premiums paid.


However, in your FTE calculation, do not include the wages and hours worked of these certain types of employees.


  • Owner of a sole proprietorship
  • Partner in a partnership
  • Shareholder of S Corporation owning more than two percent
  • Owner of more than five percent of the business or other businesses
  • Family members of the above mentioned

How to Claim the Tax Credit

To claim the ACA tax credit, attach Form 8941, Credit for Small Employer Health Insurance Premiums, to your annual business tax return (e.g., Form 1120). Form 8941 helps you calculate the amount of the tax credit you can receive. 


The premium tax credit is only available for two consecutive years. If your tax credit is more than the amount of taxes you owe, you can carry the unused amount back to previous tax years (if you still owe past taxes) or forward it to the next year. 


Nonprofit organizations can receive a refundable tax credit. This means that nonprofit, tax-exempt organizations can receive cash for unused credit. 

Can Self-Employed Individuals Get the Tax Credit?

If you’re self-employed, you may be able to receive a tax credit. You could also be eligible for tax write-offs. The IRS defines self-employed individuals as someone who is one of the following:


  • Sole proprietor
  • Partner
  • Independent contractor
  • Freelancer with no employees


There are several healthcare tax write-offs for self-employed individuals, including:


  • The Self-employed Health Insurance Tax Deduction
  • Itemized medical and dental expenses deductions
  • Premium tax credits


When you file your tax returns, you can only claim one of the deductions. Take a closer look at each write-off for self-employed individuals. 

Contact Insurance Enterprise for Group Health Insurance

If you have questions about group health insurance and need health insurance quotes, contact Insurance Enterprise at (888) 350-6605. Speak to a licensed agent and find out more about how you can get an affordable health insurance plan.