Frequently Asked Questions

Q: What is the small business tax credit and how do I know if I am eligible?

You won't be required to provide health insurance to your employees, but if you choose to, new tax credits will make covering your employees more affordable. You will also have access to a new insurance exchange to find the best deal, and the entire process will be simpler.

Q: What is the small business tax credit and how do I know if I am eligible?

A: Effective January 1, 2010, tax credits are available to qualifying small businesses that offer health insurance to their employees. So if your business qualifies for a tax credit, you are eligible right now.

About 4 million small businesses will be eligible to receive tax credits if they provide insurance.

The tax credit is worth up to 35 percent of the premiums your business pays to cover its workers -- 25 percent for nonprofit firms.  In 2014, the value of the credit will increase to to 50 percent -- 35 percent for nonprofits.

Your business qualifies for the credit if you cover at least 50 percent of the cost of health care coverage for your workers, pay average annual wages below $50,000, and have less than the equivalent of 25 full-time workers (for example, a firm with fewer than 50 half-time workers would be eligible). 

The size of the credit depends on your average wages and the number of employees you have.  The full credit is available to firms with average wages below $25,000 and less than 10 full-time equivalent workers.  It phases out gradually for firms with average wages between $25,000 and $50,000 and for firms with the equivalent of between 10 and 25 full-time workers.