Small Business Tax Credits

Small business owners, with less than 50 employees, may qualify for a tax credit if they purchase health insurance for their employees. Businesses with fewer than 25 full time employees who are all paid an average annual salary of $54,000 or less may qualify (for example, an employer with 10 employees earning no more than $540,000 total) In order to qualify, employers must purchase health insurance through the Small Business Health Options Program (SHOP) and must pay at least 50% of their employee’s premium costs. The tax credit is available to eligible employers for only two consecutive taxable years. 

The table below illustrates the two phases of tax credits to help employers — including tax-exempt employers/nonprofits — to pay a portion of health insurance premium costs.

Percentage of Health Insurance Premium Contribution

Tax Year(s)

Small Business

Non-Profit Organization

2020

50%

35%