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Can Your Business Get an Obamacare Tax Credit?

By Brett Snider, Esq. | Last updated on

Some small businesses may be eligible for tax credits under Obamacare for providing health insurance to their employees, depending on the size of the company and a few other factors.

Businesses with 50 full-time employees or more will be required in 2015 to provide their employees with a minimum level of health insurance.

What if your business has fewer than 50 full-time workers? Then you can choose whether or not to offer health coverage; if you do, then it's possible you may even qualify for a tax break.

Is your small business eligible for Obamacare tax credits?

Understanding Obamacare


About This Series: From the Editor

Small Business Health Care Tax Credit

Many small business owners will not be covered by Obamacare's employer mandate, but even those with fewer than 50 employees will have to meet certain requirements.

As September draws to a close, all employers -- with at least one employee and $500,000 in annual revenue -- must make sure to mail their employees "Obamacare letters" that inform them of their healthcare options.

The Health and Human Services Department-hosted reports that the smallest of small businesses also have the benefit of receiving a small business health care tax credit. Your business may be eligible if it:

  • Employs fewer than 25 full-time workers who make around $50,000 or less annually,
  • Pays for at least 50 percent of your full-time employees' premium costs, and
  • Provides insurance coverage offered through the Small Business Health Options Program (SHOP).

According to the Internal Revenue Service (IRS), small businesses that qualify for this tax credit can currently receive up to 35 percent of employee premiums paid for by the government. This credit's maximum will increase to 50 percent in 2014.

It may be possible, then, for a qualifying small business that covers 50 percent of its employees' insurance premiums to be fully reimbursed by this tax credit.

Self-Employed and Family Businesses

If your business consists of mostly just you, then you are likely not going to qualify for the small business health care tax credit -- unless your business makes less than $50,000 per employee. Sole proprietors, their spouses, and their children are also excluded from the full-time employee calculation, so many family businesses will not qualify for this credit.

In addition, according to Bloomberg, for many sole proprietors, underestimating future income may result in you having to repay the government for part of your Obamacare subsidy. (These tax breaks may appear in other areas, however, like the Obamacare individual healthcare subsidies.)

If you have more questions about Obamacare tax credits for small businesses, you may want to consult an experienced tax lawyer near you.

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