Covered California for Small Business (CCSB) offers small businesses a flexible and affordable way to provide health insurance to their employees while potentially benefiting from significant tax credits. By choosing a coverage level that aligns with your budget, you can offer valuable health benefits to your workforce and possibly offset some of the costs through federal tax credits.
The federal tax credit available to small businesses through CCSB is designed to ease the financial burden of providing health insurance. This credit works on a sliding scale, meaning the smaller your business and the lower your employees’ average annual wage, the higher the credit you may receive.
How Much is the Tax Credit for Providing Health Insurance to Employees?
For businesses that qualify, the tax credit can be substantial—up to 50% of premium expenses for for-profit employers and up to 35% for tax-exempt employers. Importantly, this tax credit is available for two consecutive tax years, providing a significant financial boost.
Is My Business Eligible for a Health Insurance Tax Credit?
To be eligible for this tax credit, your business must meet several criteria:
- Number of Employees: Your business must have fewer than 25 full-time equivalent employees (FTEs). When calculating the number of FTEs, you do not include owners or their immediate family members.
- Average Wage of Employees: Your employees’ average annual wage must be less than $62,000, adjusted for inflation since 2014.
- Employer-Paid Premiums: You must contribute at least 50% of the cost of insurance coverage for each employee.
For example, a small business with 10 full-time-equivalent employees, an average wage of $27,000 per employee, and an employer contribution of $80,000 toward health insurance could receive a tax credit of $40,000 in each of the first two years.
If you’re looking to offer health insurance to your employees and potentially reduce your tax liability, now is the time to explore your options with Covered California for Small Business. Contact Bay Area Health Insurance today to learn more about how CCSB can benefit your business and to get started on providing quality health coverage to your employees.
