The small business health care tax credit can meaningfully offset the cost of covering your team — up to half of what you contribute. If you're a smaller employer, it's worth understanding whether you qualify. Here's how it works.
For-profit employers can get a credit worth up to 50% of the premiums they pay toward employee coverage. Tax-exempt (nonprofit) employers can get up to 35%.
The credit is available for two consecutive tax years once you begin claiming it through the SHOP/CCSB marketplace.
| Requirement | Detail |
|---|---|
| Company size | Fewer than 25 full-time-equivalent (FTE) employees |
| Average wages | Below an annually-adjusted threshold (roughly in the mid-$50,000s per FTE) |
| Employer contribution | You pay at least 50% of employee-only premium costs |
| Where you buy | Coverage purchased through Covered California for Small Business (CCSB/SHOP) |
The credit is largest for the smallest, lowest-wage employers and phases down as company size and average wages increase. Exact thresholds adjust yearly.
The math rewards exactly the businesses we specialize in. The fewer employees you have and the lower the average wages, the larger your credit — a very small business paying modest wages can capture the full 50%. It phases out as you approach 25 FTEs or higher average wages. For a 2–10 person business, this can be substantial. We help you determine if you qualify and structure your plan through CCSB to claim it — free.
To claim the credit, you buy your group coverage through Covered California for Small Business (CCSB) and then claim the credit on your business tax return (IRS Form 8941). Because the eligibility rules and the CCSB enrollment need to line up, it helps to have someone who knows both. We handle the CCSB setup and coordinate so you're positioned to claim the credit. See how to set up group coverage or get a free quote.
Tax matters are specific to your situation — consult your tax professional to confirm your eligibility and credit amount.
Here is a trick the payroll platforms will not tell you: we shop every major carrier at the Silver level to find who is priced best for your exact team — then set up employee choice so your people can pick their own plan and pay any difference pre-tax. You control the budget; they get the choice. Everyone wins.