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Some employers may be eligible for a small business tax credit

A tax credit is available for employers with fewer than 25 full-time equivalent employees making annual wages of less than $50,000. Currently, the tax credit is available for up to 35 percent of the average cost for employer-sponsored coverage in the employer’s state. Both taxable and tax-exempt (nonprofit) businesses qualify, although tax-exempt businesses can only receive a tax credit for up to 25 percent.

Need-to-know information about the tax credit:

  • Certain religious organizations receiving coverage through a church plan are eligible for the credit.
  • Small employers that cover employees through a multi-employer health and welfare plan qualify for the tax credit.
  • Leased employees are counted when determining eligibility for the credit if the employer, not the leasing organization, pays for health insurance.
  • Employer contributions to health savings accounts, health reimbursement arrangements, and flexible spending accounts are not counted as insurance premium payments when determining the credit amount.

Additional information about the small business tax credit is available on the IRS website.