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How to Claim Small Biz Health Care Tax Credit

By Andrew Chow, Esq. on March 08, 2012 | Last updated on March 21, 2019

Paying for employee health insurance can take a bite out of a small business' budget. That's where the Small Business Health Care Tax Credit can come into play.

The tax credit is specifically designed to help small businesses and tax-exempt organizations cover the costs of employee health insurance, reports. It can be especially helpful if you're a small business that's offering employee health care for the first time.

However, not all small businesses can claim the health-care tax credit. Here's how to figure out if you qualify:

The Small Business Health Care Tax Credit is only for small employers with fewer than 25 full-time equivalent employees, according to the IRS.

Those employees must make an average wage of less than $50,000 a year. In addition, a small business owner must pay at least half of each employee's single (not family) health-insurance premium.

If your small business qualifies, you can claim a credit up to 35% of the premiums you paid in 2011, according to That figure will go up to 50% in 2014.

For tax-exempt organizations, you can claim a maximum credit of 25% for 2011 premiums. That will also go up, to 35% in 2014.

As for paperwork, you must first calculate your health-care tax credit on Form 8941 (Credit for Small Employer Health Insurance Premiums). For small businesses, the actual credit gets claimed on Form 3800 (General Business Credit), according to

Tax-exempt groups, on the other hand, should claim the credit on Form 990-T (Exempt Organization Business Income Tax Return).

Also note that for tax-exempt employers, the Small Business Health Care Tax Credit is refundable -- meaning, you may be able to get the credit as a refund, even if you have no taxable income, according to the IRS. Whatever your situation, it may be wise to consult an experienced tax attorney to get the most out of your business tax return.

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