Small Business Health Care Tax Credit

If you help cover your team's health insurance, you may be able to claim back up to 50% of the premiums you paid (35% for tax-exempt employers). The credit is designed for smaller employers with lower average wages.

How the credit works

The maximum is highest for the smallest, lowest-wage employers and phases out as your team grows or average pay rises.

Up to 50% back

For-profit employers can recover up to 50% of premiums paid; tax-exempt organizations up to 35%.

Fewer than 25 FTEs

The credit is available to employers with fewer than 25 full-time equivalent employees and begins phasing down above 10.

Lower average wages

The full credit targets employers with modest average annual wages; it reduces as the average rises past the IRS threshold.

Up to 50% of premiums

Recovered as a credit against your tax for two consecutive years through a qualifying SHOP plan — 35% if you're a tax-exempt employer.

Who qualifies

You likely qualify if…

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You have fewer than 25 full-time equivalent employees.
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You pay at least 50% of your employees' premium cost.
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Your average annual wage is below the IRS inflation-adjusted limit.
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Coverage is offered through the SHOP Marketplace (or a qualifying exception).

Good to know

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Owners, partners, and certain family members generally aren't counted toward the credit.
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The credit can be claimed for only two consecutive tax years.

How to claim it

The credit is figured on IRS Form 8941 (Credit for Small Employer Health Insurance Premiums) and carried to your business return. Mainstreet gathers your FTE count, average wage, and premium data, then runs the worksheet to find your exact amount.

Want a quick estimate? Answer a few questions and we'll email you a copy.

Educational information only and not tax, legal, or accounting advice. The Small Business Health Care Tax Credit (IRC §45R, Form 8941) is fact-specific and uses a phase-out worksheet; consult a qualified professional before acting. Figures shown are illustrative.