Financial Help for Employers
Employers who offer health insurance to their employees through Covered California for Small Business may qualify for a federal tax credit that can lower their costs. Learn how the credit works, what affects the amount and how employer and employee costs are shared.
Financial help for small businesses is different.
Eligible small businesses may be able to get a federal tax credit available only through CCSB, and the amount is based on factors like business size, average employee wages and how much the employer contributes toward premiums.
What the Tax Credit Helps Pay For
The federal small business health care tax credit can reduce the overall cost of providing health insurance to your employees. Eligible small businesses can receive up to 50 percent of their premium contributions back, making it more affordable to offer quality health benefits.
Maximum Credit Amounts
The most you can receive depends on your organization type:
- For-profit employers: Up to 50 percent of eligible premium expenses
- Tax-exempt employers: Up to 35 percent of eligible premium expenses
How Long the Credit Applies
The credit applies for up to two consecutive taxable years. After that period, your business is no longer eligible for the credit, even if you continue to offer insurance through CCSB.
What Affects Your Tax Credit
The credit is based on a sliding scale. Smaller businesses with lower average employee wages may qualify for a larger credit. Your credit amount depends on several factors:
- Number of employees: Your business must have fewer than 25 full-time equivalent employees. Owners and immediate family members of the owner are not counted when calculating the credit.
- Average annual wages: Your employees must have an average annual wage below the IRS threshold. This limit is adjusted for inflation each year — check IRS Form 8941 for the most current figure.
- Employer monthly premium contribution: You must contribute at least 50 percent of the cost of health insurance for each employee.
To check whether your business qualifies for insurance through CCSB, review the eligibility guidelines.
How Employer and Employee Costs Work
When you offer insurance through Covered California for Small Business, you choose how much to contribute toward your employees' premiums. Your employees pay the remaining portion, which depends on the plan they choose.
The cost of insurance for your business depends on factors like:
- The size and location of your business
- The ages of your employees
- The health and dental plans you select
- The metal tier level you set as your reference plan
Employers can control their costs by setting a contribution level tied to a reference plan. Employees can then choose from available plans within the coverage levels you offer. To explore plan options, visit health plans.
To get a personalized cost estimate, you can get a quote from our team.
See What Insurance Could Cost Your Business
Our team can provide a custom quote and help you understand your plan options, contribution choices and potential tax credit eligibility.
Before You Claim the Credit
Not all businesses will qualify for the federal small business health care tax credit. CCSB does not determine your tax eligibility — that is determined by the IRS based on your specific situation.
To verify whether your business qualifies:
- Consult a professional tax adviser. A licensed tax professional can review your business details and confirm eligibility.
- Review IRS guidance. The IRS provides resources specifically for small employers, including information on the Small Business Health Care Tax Credit and IRS Form 8941: Credit for Small Employer Health Insurance Premiums
- Check annually. Federal tax credit income limits are adjusted each year as updated IRS publications become available, typically in the first quarter of the following calendar year.
Common Questions
Next Steps for Your Business
After reviewing costs and possible tax credits, choose the next step that fits where you are in the process.