Although the Patient Protection and Affordable Care Act (PPACA) does not require small businesses to offer health insurance, employers with 24 or fewer full-time-equivalent (FTE) employees may be eligible for a small business tax credit of up to 35% to help with the cost of providing group medical coverage to their employees. Eligible tax-exempt groups may qualify for a tax credit of up to 25%.
For 2014, this credit is increased to a maximum of 50% (35% for tax exempt groups). It’s available to qualifying small businesses that purchase coverage through the state’s new “Small Business Health Options Program” (SHOP). Qualifying small businesses may claim the credit through 2013, and for two additional years beginning in 2014.
The maximum credit will be available to businesses with 10 or fewer FTE employees, who have average annual wages below $25,000. Employers with 24 of fewer FTE employees who have average annual wages below $50,000 may also qualify. In both cases, the employer must contribute at least 50% of the employee-only cost towards the cost of their employee’s coverage. Dental and vision coverage also qualify for the credits. Large businesses, however, are not eligible for these tax credits.
How to determine your number of Full-Time-Equivalent employees: Total the annual hours worked by your part-time employees, and divide by 2,080. This should yield the equivalent number of full-time employees (from your part-time population). Next, add the number of full-time employees working at least 40 hours per week. The total is your total number of FTE employees.