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Small Employer Credit

Small Employer Credit

PPACA provides a tax credit for small employers that pay for their employees’ healthcare costs. The tax credit is a refund for quarterly payments to the IRS for income tax or Medicare withholdings from employees’ wages. To qualify for the credit, nonprofit employers must:

  • Cover at least 50 percent of employees’ premiums; and
  • Have 25 employees or fewer; and
  • Have average wages of less than $50,000 per year.

The credit amount is 35 percent for nonprofits and 50 percent for for-profit organizations for coverage purchased through an exchange. The credit amount is reduced by a scale for employers with more than 10 employees or payroll more than $25,000.

  In March of 2013, the IRS announced an 8.7 percent reduction in the amount of the small employer health credit available to small businesses and nonprofits due to sequestration.