One of the more underutilized tax credits for small businesses is the Small Business Health Care Tax Credit. Established in 2010, it is designed to help small businesses that cover at least half of the single (not a family plan) healthcare premiums for its employees. The deadline for claiming the credit is March 15 of the current tax year, and the existing rate is available through the 2013 tax year (an enhanced version of the credit goes into effect for 2014).

The tax credit is available to those businesses – including tax-exempt businesses – employing fewer than 25 full-time workers. In addition, the average salary must be less than $50,000. With a maximum credit of 35 percent, the amount that can be claimed adjusts downward as the employee base and their wages rise. Thus, those businesses with up to ten employees will be able to file for the maximum credit amount. The guidelines for determining what constitutes a full-time employee are quite clear, but part-time employees count as less than one full-time employee, according to the IRS.

One appealing aspect of the tax credit is that it may be available even if no taxes are owed. According to the IRS website, “…if you are a small business employer who did not owe tax during the year, you can carry the credit back or forward to other tax years.” A professional tax preparer should be able to answer questions regarding this benefit, or both the IRS tax hotline and website have specific details.

The website also points out another advantage to taking the credit: because “the amount of the health insurance premium payments are more than the total credit, eligible small businesses can still claim a business expense deduction for the premiums in excess of the credit.” This means it is both a credit and a deduction – kind of a double-your-money-back proposition.

The credit is not available for all small businesses, and the rate at which the amount is reduced means that many of the eligible small businesses will not receive the full credit. However, any amount that can be recouped is worth investigating.

Although the deadline for claiming this credit is March 15 (the corporate tax filing deadline), businesses may be able to file an amended tax return and still claim the credit if they failed to do so in their original filing.

For complete details visit:, or go to the IRS website ( and use the search feature with the phrase “small business health care credit.”


Wolfson, Bernard J. “Healthcoverage Tax Credit Deadline Nears.” The Orange County Register 3/6/13.