SHOP Marketplace basics for employers

The Small Business Health Care Tax Credit

You may qualify for the Small Business Health Care Tax Credit that could be worth up to 50% of the costs you pay for your employees' premiums (35% for non-profit employers).

See if you qualify for savings

Enrolling in a Small Business Health Options Program (SHOP) plan is generally the only way for a small business or non-profit to claim the Small Business Health Care Tax Credit. To qualify for the tax credit, all of the following must apply:

  • You have fewer than 25 full-time equivalent (FTE) employees
  • Your average employee salary is about $50,000 per year or less
  • You pay at least 50% of your full-time employees' premium costs
  • You offer SHOP coverage to all of your full-time employees. (You don't have to offer it to dependents or employees working fewer than 30 hours per week to qualify for the tax credit.)



Higher benefits for smaller businesses

The tax credit is highest for companies with fewer than 10 employees who are paid an average of $25,000 or less. The smaller the business, the bigger the credit.

Questions?

More answers: The Small Business Health Care Tax Credit

What’s an example of how the tax credit works?

Here's one scenario:

Number of employees: 10
Wages: $250,000 total, or $25,000 per employee
Employer contribution to employee premiums: $70,000
Tax credit amount: $35,000 (50% of employer's contribution)
Do I have to buy SHOP insurance to claim the tax credit?

Generally, yes. Buying SHOP insurance is generally the only way to qualify for the Small Business Health Care Tax Credit.

What if I have seasonal workers?

Generally, seasonal workers aren't included in the full-time employee and wage calculation unless they work for you more than 120 days during the tax year. Learn more about seasonal workers from the IRS.

Where can I learn more about the Small Business Health Care Tax Credit?

The Internal Revenue Service has more information about the Small Business Health Care Tax Credit.