For tax years 2010 through 2013, an employer that employs no more than 25 FTEs for the tax year, that has average annual wages that do not exceed $50,000 (as adjusted for cost of living in 2014 and subsequent years), and that provides health insurance coverage for its employees, may be eligible to receive a tax credit. The tax credit will be equal to a percentage of the employer’s contribution toward each employee’s health insurance premium if the employer contributes at least 50% of the total premium cost or 50% of a benchmark premium. The amount of the tax credit is capped at 35% of the employer’s contribution and the full amount of the tax credit is available only to employers with ten or fewer FTEs and average annual wages of $25,000 or less. Tax-exempt small employers meeting these requirements are eligible for tax credits of up to 25% of the employer’s contribution toward the employee’s health insurance premium.

For tax years 2014 and later, an eligible small employer that purchases coverage through the Exchange will be entitled to a tax credit of up to 50% of the employer’s contribution toward the employee’s health insurance premium if the employer contributes at least 50% of the total premium cost. The tax credit will be available for two years. The full credit will be available to employers with ten or fewer full-time employees and average annual wages of less than $25,000.  Tax-exempt small employers meeting these requirements are eligible for tax credits of up to 35% of the employer’s contribution toward the employee’s health insurance premium.

The tax credit may be claimed by an eligible small employer as a general business tax credit on its tax return; no deduction will be allowed for that portion of premium paid by an employer which is equal to the amount of the tax credit claimed by such small employer.