Tax Benefits of Company Sponsored Health Insurance Plans

When you offer a qualifying group health insurance plan to your employees, you can enjoy multiple tax advantages. For example, your business can typically deduct 100% of the premiums it pays. And when you offer group health insurance as part of a total compensation package, you might be able to cut your payroll taxes as well.
 
In addition, the Affordable Care Act has created new tax advantages for businesses that offer employee health insurance. A Small Business Health Care Tax credit can help you afford health care coverage for your employees, especially for those who are considered low- and moderate-income workers.
 
You may qualify for a 50% credit off your health insurance costs if you:
 
  • Have fewer than 25 full-time equivalent employees (FTEs);
  • Pay average annual wages below $53,000;
  • Offer a qualified health plan to employees through the Small Business Health Options Program Marketplace; and
  • Contribute 50% or more toward employees’ self-only health insurance premiums.
The smaller your business, the larger your credit. It can be worth up to 50% of your contribution toward employees’ premium costs (up to 35% for tax-exempt employers).  You can claim the credit for any two consecutive taxable years beginning in 2014.
 

Game Plan

  • To see if you qualify for the Affordable Care Act’s Small Business Health Care Tax Credit, visit the IRS’ info page. Also, be sure consult with your tax advisor or accountant.
  • For more information about the Small Business Health Options Program, call the SHOP hotline at 1-800-706-7894 (TTY users: 1-800-706-7915) Monday through Friday, 9-5 ET.
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