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Savings Calculator

Find out if you might be eligible to receive a tax credit in 4 easy steps

Whether you’re a for-profit business or a tax-exempt organization, you might be eligible for the Federal Small Business Tax Credit. To qualify, you must provide health insurance to all employees, pay for at least half the employee-only premium cost for either each employee’s chosen coverage or half the cost of the employer’s chosen reference plan, have fewer than 25 full-time equivalent employees, and pay an average annual wage below $50,000. Note, the business owner and any immediate family members who work for the business are not counted as employees and their income isn't counted in the average wage.

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Calculating FTEs can be complex. Click here for guidance. Note: These results are only an estimate. Your actual eligibility for the tax credit will be determined when you file your business’s taxes. Consult your tax advisor for more information.

Your results

Estimated small business tax credit:

How We Made This Calculation

1. In order to qualify for the tax credit:

  • You must have fewer than 25 full-time equivalent (FTE) employees,
  • The average annual wage of all employees, not including salary to owners or their family members, must be less than $51,000. Wages, for purposes of the credit, are defined as the amounts treated as wages under section 3121(a) for purposes of FICA (Medicare and Social Security taxes). This is also known as your federal taxable wages,
  • You must contribute at least 50% of the employee-only premium cost for either each employee’s chosen coverage or half the cost of the employer’s chosen reference plan. You must also contribute at the same rate to any add-on coverage such as dental or vision coverage. (Contributions are based on the employee-only premium; For employees with employee-plus-one or family coverage, you must contribute at least 50% of the employee-only premium amount. You are not required to contribute toward any dependent premiums.)

2. While for-profit organizations are eligible to receive a tax credit of up to 50% of their contributions to employee health insurance premiums and tax exempt organizations can receive up to 35%, the amount of credit this amount is only available where the FTE where the FTE count is at or below 10 employees and where the average per-employee salary is equal to or less than $25,400 per year. The Tax credit eligibility is gradually reduced to $0 for each FTE employee above 10 FTEs (no eligibility once it reaches 25 FTEs) or where the average per-employee salary raises above $25,400 per year (no eligibility once it reaches $51,000 or more per year).

3. The calculation is based on the number of Full-Time-Equivalent employees you have. This can be calculated either from the total hours worked by your employees, or by an actual count of the number of people you employ (generally, two part time = one FTE). Even if you have more than 25 total employees, you may still qualify for a tax credit if you have employees who only work part-time such that your FTE number is under 25.

4. You can calculate the number of FTE employees you have by adding-up the total number of hours worked by all your employees (or you can estimate it based on the number of days or weeks worked) and dividing that total by 2,080 (2,080 is the number of hours worked in 40-hour work week for a single year). Round the resulting number down to the nearest whole number of FTEs. Do not include any overtime when totaling the number of hours worked.

5. Owners and their employed family members are excluded from both the salary and FTE calculations but may be eligible for participation in a health plan as long as one true ERISA employee is covered through the employer-sponsored plan.?An owner (or family member) is excluded from the salary and FTE calculations if they are:

  • A sole proprietor
  • A partner in a partnership
  • A shareholder owning more than 2% of an S corporation or an owner of more than 5% of other types of businesses Employed family members such as:
    • Children or grandchildren
    • Siblings or step-siblings
    • Parents or grandparents
    • Step-parents
    • Nieces or nephews
    • Aunts or uncles
    • Sons-in-law or daughters-in-law
    • Fathers-in-law or mothers-in-law
    • Brothers-in-law or sisters-in-law

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