Yes. The federal Small Business Health Care Tax Credit can cover up to 50% of the employee premiums you pay (35% for tax-exempt employers) if you have fewer than 25 full-time equivalent employees, pay average wages below an inflation-adjusted limit, contribute at least 50% of employee-only premiums, and buy coverage through the SHOP Marketplace. You claim it on IRS Form 8941 for up to two consecutive years.
If you’ve been holding off on offering health insurance because of cost, this credit is worth knowing about. In my experience working with business owners across Central Florida, most have never even heard of it.
Let me walk you through how it works, whether you qualify, and how to actually claim it — because leaving this money on the table is a mistake you don’t have to make.
What Is the Small Business Health Care Tax Credit?
The Small Business Health Care Tax Credit was created as part of the Affordable Care Act. It’s designed specifically to help small employers afford health coverage for their workers. The credit is worth up to 50% of the premiums you pay for employee coverage (35% for tax-exempt nonprofit employers). That’s not a deduction — it’s a direct dollar-for-dollar reduction in your tax bill.
Here’s the important distinction: a deduction reduces your taxable income, but a tax credit reduces what you actually owe. If you owe $10,000 in federal taxes and qualify for a $5,000 credit, you only pay $5,000. That’s real money back in your business.
Do You Qualify?
Not every small business qualifies, but the eligibility rules are more flexible than many people expect. To be eligible, your business generally needs to meet all three of the following criteria:
- Fewer than 25 full-time equivalent employees (FTEs). Part-time workers count toward this total on a proportional basis. If you have 10 full-time and 10 half-time employees, that’s 15 FTEs.
- Average annual wages below the IRS limit. The threshold is indexed for inflation each year, so check the current figure in the Form 8941 instructions. The lower your average wages, the higher your credit percentage.
- You pay at least 50% of employee-only premium costs. You don’t have to cover dependents, but you must cover at least half of what each employee pays for their own coverage.
The credit is on a sliding scale — businesses with 10 or fewer FTEs and the lowest average wages (below an inflation-adjusted amount set by the IRS) qualify for the maximum 50% credit. As your employee count and wages rise toward the cap, the credit phases down.
You Must Use the SHOP Marketplace
This is where a lot of small business owners get tripped up. To claim the Small Business Health Care Tax Credit, you must purchase coverage through the SHOP (Small Business Health Options Program) Marketplace — not directly from an insurance company.
SHOP is the ACA’s health insurance exchange designed for employers with 1 to 50 employees. In Florida, SHOP coverage is purchased through a SHOP-registered broker or directly from a participating insurer, and carrier participation can be limited — so confirm what’s available in your county before you build your plan around the credit. Unlike individual marketplace plans, there’s no set open enrollment window for SHOP. Read more in what a SHOP plan is and whether you can use it.
As an independent broker, I can help you shop SHOP plans at no cost to you. Broker assistance is free for businesses, and having a licensed professional compare options can save you significant time and money.
How to Claim the Credit
Once you’ve enrolled in a SHOP plan and paid premiums, you claim the credit by filing IRS Form 8941 with your federal business tax return. The credit can be carried back one year or forward 20 years if you don’t owe enough tax to use it in the current year. For nonprofits, it’s a refundable credit, meaning the IRS will actually write you a check if it exceeds your tax liability.
One important detail: you can only claim the credit for two consecutive tax years. So if you’ve already claimed it once, make sure you’re maximizing it while you still can.
Don’t Forget the Premium Deduction
Even if you don’t qualify for the tax credit — or after your two-year credit period ends — you can still deduct 100% of the health insurance premiums you pay for employees as a business expense. This reduces your taxable income dollar for dollar, which is a substantial benefit on its own. Here’s more on deducting health insurance premiums as a business expense.
| Option | Tax benefit | Key rule |
|---|---|---|
| SHOP plan + tax credit | Credit up to 50% of employer premiums | Under 25 FTEs; 2 consecutive years max |
| Any group plan | Premiums deductible as a business expense | Deduct what the business pays |
| QSEHRA | Tax-free reimbursements | 2026 caps: $6,450 self-only / $13,100 family |
If a group plan still feels out of reach, a QSEHRA or ICHRA can be a lower-commitment alternative — see what to do if you can’t afford to offer health insurance right now.
If you’re a self-employed individual or sole proprietor, you may also be able to deduct 100% of the premiums you pay for yourself, your spouse, and your dependents as an above-the-line deduction on your personal return — even if you don’t itemize. (Details: writing off health insurance as self-employed.)
The Bottom Line for Florida Small Business Owners
Offering health insurance is one of the best things you can do to attract and retain good employees in a competitive job market. And when the federal government is willing to offset up to half your costs, the math starts to look very different. If you’re running a small business in DeLand, Deltona, Orange City, or anywhere in the Volusia County area, I’d encourage you to look seriously at your options.
Frequently Asked Questions
Who qualifies for the Small Business Health Care Tax Credit?
Employers with fewer than 25 full-time equivalent employees, average annual wages below the IRS inflation-adjusted limit, and who pay at least 50% of employee-only premiums for coverage bought through the SHOP Marketplace. The owner and family members generally don’t count as employees for the calculation. Check current thresholds in the Form 8941 instructions.
How long can I claim the small business health insurance tax credit?
The credit is available for two consecutive tax years beginning with the first year you claim it through SHOP coverage. After that, you can still deduct the premiums your business pays as an ordinary business expense. Unused credit can be carried back one year or forward up to 20 years.
Can I get the tax credit if I buy a group plan directly from an insurer outside SHOP?
Generally no. The credit requires a qualified health plan purchased through the SHOP Marketplace, with limited exceptions. If SHOP options in your Florida county are thin, a broker can compare the credit’s value against non-SHOP group plans, a QSEHRA, or an ICHRA to find the best net cost.
Want to find out whether your business qualifies and which plan makes the most sense for your team? I’ll run the numbers and make sure you’re not leaving credits on the table. I’m Michael McAllister, owner of Choice Health Insurance Brokers in DeLand, FL — a licensed broker appointed with 200 carriers (NPN 18229135). My help costs you nothing; I’m paid by the carriers. Call or text me at 321-230-9536 or visit choice.healthcare for a free quote and a plan comparison built around your situation.