Blog
Employment Laws

Does Your Company Qualify for This ACA Tax Credit?

This Affordable Care Act tax credit gives small businesses up to 50% of coverage for employee's health premiums.

Blog Author - Justworks
Justworks
May 2, 20162 minutes
Blog Author - Justworks
Justworks

Justworks is a technology company that levels the playing field for all small businesses. Through our software and as a partner, we help our customers take care of their teams, streamline their operations, and navigate the complex aspects of managing a workforce with confidence.

461 postsAuthor's posts
Blog - Hero - Doctor's office

Now that many employers are required to offer some kind of healthcare, it’s beneficial to know what tax breaks your company may be eligible for.

As of 2016, The Affordable Healthcare Act (ACA) has transitioned into Phase II of the tax credit breaks, which is good news for employers — it means that potential credits for-profit small businesses are eligible to receive have jumped from 35% to 50%.

Resources

Looking for additional resources for your business?

Browse through guides and e-books that give you the knowledge to confidently make decisions for your business.

Learn More

ACA Tax Credit Questions:

Do I Qualify?

Here is a breakdown of the qualifications:

Average Salary Requirement of $54,200

Some of your employees may make more than $54,200 a year, but the important factor here is that the average of their annual wages are below $54,200. According to the IRS, these wages are also adjusted for inflation beginning in 2014.

Contribute 50% Toward Employees’ Premiums

To qualify as an employer, you must contribute at least 50% of premiums for every employee enrolled in a qualified health plan (or QHP). This QHP also has to be [offered through the SHOP Marketplace](https://www.healthcare.gov/small-businesses/employers/, which we explain more below.

No More Than 24 Full-Time Employees

Although there is no definition of full-time in the Fair Labor Standards Act, the ACA defines full-time as 30 hours a week. If you’re still confused about where to draw the line, you can check out our FLSA guide.

Coverage Through the SHOP Marketplace

The SHOP Marketplace (short for the Small Business Health Options Program) is a part of each state’s Health Insurance Marketplace. Depending on your state, you may be eligible for SHOP with as many as 100 employees. However, you are only eligible for the Small Business Healthcare Tax Credit if you have 24 employees or less.

What Does the Tax Credit Entail?

Employers who qualify for the Small Business Healthcare tax credit are eligible to receive 50% of the average employee healthcare premium. Non-profit businesses are eligible for 35%. So what does that mean exactly?

In sum, if your company qualifies, you could easily save tens of thousands of dollars a year. Healthcare.gov actually offers a calculator to help you estimate eligibility and how much you could save. The calculator will help you determine:

  • SHOP Full-Time Employees

  • Small Business Healthcare Tax Credit Estimator

  • Maximum Participation Rate Calculator

Even if you don’t qualify for the Small Business Healthcare tax credit, being aware of ACA tax credit requirements may be helpful down the road. If you have further questions about the ACA, check out our ACA small business guide here, which includes 2016 changes and other tax penalties and credits.

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.
Discover more of what you like
PEOHealth InsuranceBenefits & PerksPayroll & TaxesExpenses & FinanceEmployment LawsInternational

Check out our newsletter

Monthly tips on running a business in your inbox.

Check out our newsletter

Monthly tips on running a business in your inbox.
Written By
Blog Author - Justworks
Justworks
May 2, 20162 minutes

Justworks is a technology company that levels the playing field for all small businesses. Through our software and as a partner, we help our customers take care of their teams, streamline their operations, and navigate the complex aspects of managing a workforce with confidence.

Learn more with Justworks’ Resources

Scale your business and build your team — no matter which way it grows. Access the tools, perks, and resources to help you stay compliant and grow in all 50 states.