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.
Form 8941 - All you need to know
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.
To be eligible for the Credit for Small Employer Health Insurance Premiums, your startup must have:
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%.
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.
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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