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Credit for Small Employer Health Insurance Premiums: Form 8941

Form 8941

Is the Credit for Small Employer Health Insurance Premiums Worth it for Venture Backed Startups? **NO.  While many startups offer health insurance, exceptionally few meet the requirement that the average full time salary of less than $50,000 per year. Across the 500+ startups we worked with in 2020, none were eligible for the Credit for Small Employer Health Insurance Premiums.

What is Credit for Small Employer Health Insurance Premiums?

This is a federal tax credit offered by the IRS that is available to startups with <25 employees who provided health insurance, and whose average salary was <$50,000 per employee.

Which Startups are Eligible to Claim the Credit for Small Employer Health Insurance Premiums?

To be eligible for the Credit for Small Employer Health Insurance Premiums, your startup must have: 

  • Paid health insurance premiums provided through a Small Business Health Options Program (SHOP) Marketplace
  • Covered >50% of the health insurance cost
  • Had <25 full time employees
  • Paid average annual wages for the tax year of less than $50,000 per FTE

How much credit will my startup receive for the Credit for Small Employer Health Insurance Premiums?

The maximum credit that a small business can receive for employer paid health insurance is 50% of the health insurance premiums paid. It can be taken against both the regular and alternative minimum tax. The maximum for small tax-exempt employers is 35%.

How Do I Apply for the Credit for Small Employer Health Insurance Premiums?

You can apply for the Credit for Small Employer Health Insurance Premiums on form 8941 and 3800, which is a part of the 1120 C-Corporation Income Tax Return, due 4/15 every year and can be extended to 10/15 every year.

Where Can I Find More Information About the Credit for Small Employer Health Insurance Premiums?

If you would like more information on the Credit for Small Employer Health Insurance Premiums, you can check out the Form 8941 section on the IRS website here.

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