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I own a small business. Someone told me I might be able to get a break on my taxes if I buy insurance for my employees.

  • October 7, 2015

Q. I own a small business. Someone told me I might be able to get a break on my taxes if I buy insurance for my employees.

A. If you have fewer than 25 full-time employees, their average salary is less than about $50,000, and you cover at least half the cost of their insurance (for self-only coverage for each employee; there’s no requirement that the employer fund a specific amount of the cost to add dependents to the coverage), you’re eligible for a tax break if you purchase coverage through the ACA-created SHOP exchange in your state.

The maximum credit amount is 50 percent of premiums paid, and employers are eligible to claim the credit for up to two consecutive years.

The tax credits took effect in 2010, but were not as robust as they are today. The requirement that coverage be purchased through the SHOP exchanges took effect in 2014; prior to that, the SHOP exchanges were not yet operational.

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