The IRS recently issued the 2018 version of the Form 8941, Credit for Small Employer Health Insurance Premiums, and the related instructions. Form 8941 is used by small employers to calculate and claim the small business health care tax credit. As background, this tax credit benefits employers that do all of the following:
- Offer coverage through the small business health options program, also known as the SHOP Marketplace
- Have fewer than 25 full-time equivalent employees
- Pay an average wage of less than $50,000 a year (indexed annually)
- Pay at least half of employee health insurance premiums
An employer may only claim the credit for a two-consecutive-year period.
The 2018 instructions include three important information items.
First, the average annual wage for 2018 is increased from $53,000 (in 2017) to $54,000.
Second, the IRS states that employers located in Hawaii cannot claim this credit for insurance premiums paid for health plans beginning after 2016. This is because Hawaii’s Section 1332 Innovation Waiver related to the SHOP was approved by HHS. Thus, effective 2017, the state of Hawaii is no longer required to maintain a SHOP because of the state’s Prepaid Health Care Act, which requires employers of all sizes to offer affordable coverage to employees. The state also provides premium assistance to small employers.
Lastly, for calendar year 2018, some SHOP Marketplaces in certain counties didn’t have qualified health plans available for employers to offer to employees. However, relief is available which allows eligible small employers with a principal business address in those counties to claim the credit for 2018, including coverage through a SHOP or coverage that met the requirements for relief under IRS Notice 2016-75 (if applicable), for all or part of 2017.
If a small employer qualifies for the health care tax credit, they should work with their accountant to properly claim the credit with the IRS.
Form 8941 »
Form 8941 Instructions »