Small business · Tax credit
The small business health care tax credit, step by step
Worth up to 50% of the premiums you pay, but only for two years and only if you set it up right. Here’s how the IRS tests work.
Your info goes to Nexus only and is never sold. Not to a call center, not to a list of “partners.”
- Under 25 FTEs
- Avg. wages under $67,000
- Up to 50% of premiums
Check if my business qualifies
Your info goes to Nexus only. Never sold. No pitch, no obligation.
The three tests
- Coverage: the credit is generally for premiums on qualified health plans offered through a SHOP Marketplace.[1]
- Size: fewer than 25 FTEs. An employer with exactly 25 FTEs gets no credit because of how the phaseout works.[1]
- Wages: average annual wages under $67,000 per FTE.[1]
The phaseout catches most people
If you had more than 10 FTEs and average annual wages over $33,000, the FTE and wage limits each reduce the credit, which can bring it to zero even under 25 FTEs and $67,000.[1] Average wages of $67,000 or more reduce the credit to zero.[1]
Who doesn’t count
- Sole proprietors, partners, more-than-2% S corporation shareholders, more-than-5% owners of other businesses, and certain family members aren’t counted as employees, and premiums paid for them don’t count.[1]
- Seasonal employees who work 120 or fewer days aren’t counted in FTEs and average wages, but premiums you pay for them do count toward the credit.[1]
- Count no more than 2,080 hours per employee when figuring FTEs.[1]
Claiming it
- Most businesses claim it as part of the general business credit on Form 3800; tax-exempt employers claim it as a refundable credit on Form 990-T.[1]
- You must reduce your premium deduction by the amount of the credit.[1]
Related: small group rules in Michigan and contribution and participation rules. Talk to your tax preparer before you claim it; we’ll coordinate with them on the plan side.
Sources
- IRS, Instructions for Form 8941 (2025). https://www.irs.gov/instructions/i8941
Checked October 16, 2026. 2027 Marketplace plans and final 2027 rates aren’t published yet; we’ll update this page when they are.
Frequently asked questions
Who qualifies for the small business health care tax credit?
For 2025 tax years: fewer than 25 FTEs, average annual wages under $67,000 per FTE, and a uniform employer contribution of at least 50% of premiums under a qualifying arrangement, generally through SHOP.
How long can I claim the credit?
For a 2-consecutive-tax-year credit period.
Do owners count as employees for the credit?
No. Sole proprietors, partners, more-than-2% S corporation shareholders and more-than-5% owners aren't counted, and premiums paid for them don't count.
Will you sell my information?
No. Your information goes to Nexus Benefit Solutions only and is never sold.