Small Business Health Care Tax Credit Questions and Answers: Who Gets the Tax Credit
Q. Who is eligible?
A. A qualified employer must have fewer than 25 full-time employees or a combination of full-time and part-time (for example, two half-time employees equal one employee for purposes of the credit); the average annual wages of employees must be less than $50,000, and the employer must pay at least half of the insurance premiums. The employer must also pay premiums under a “qualifying arrangement.” See the “What expenses count” question on the Calculating the Credit page.
Q. Can a tax-exempt organization be eligible?
A. Yes. A tax-exempt organization described in Code section 501(c) and exempt from tax under Code section 501(a) that otherwise meets the definition of a qualified employer may be eligible. See the “What is the maximum credit for a tax-exempt qualified employer?” question on the Calculating the Credit page.
Q. Can a household employer qualify, even if he or she is not directly engaged in a trade or business?
A. Yes. For tax years 2010 through 2013, a household employer can qualify.
Q. How about a small employer outside the U.S.?
A. A qualified employer outside the United States (including a U.S. territory) with income connected with a trade or business in the United States may claim the credit for tax years 2010 through 2013 if it pays for coverage issued in and regulated by one of the 50 states or the District of Columbia.
Q. How are employer contributions to a multi-employer plan treated for purposes of the credit?
A. Contributions are treated as payment of premiums for purposes of the credit, but 100 percent of the cost of coverage must be paid from employer contributions, not by employees. See Notice 2010-82 for more guidance.
Q. Can a section 521 farmers cooperative be eligible?
A. Yes. A section 521 farmers cooperative subject to tax under section 1381 is eligible as a taxable employer if it otherwise meets the definition of a qualified employer. See the “Who is eligible” question on this page.
- Calculating the Credit
- Determining FTEs and Average Annual Wages
- How to Claim the Credit
- Transition Relief for Tax Years Beginning in 2010