Care.com HomePay

Welcome! We’re Here to Help
M-TH 8-6 CST; F 8-5 CST
888-273-3356

Log in  
Become a Client

Change Password

Close X

Username  
New Password
 
Confirm New Password
 
Your password must contain at least 6 characters.

Change Password
  • Home
  • Tour
  • Service
  • Answers
  • Resources
  • About
  • Contact
  • Get Started

Health Insurance Tax Credit

Your household employee is required to have health insurance. And if you contribute, an employer tax break is available to you.

  • Expert Advice
  • Helpful Videos
  • Myths & Mistakes
  • Requirements By State
  • Info For Employees

The Patient Protection and Affordable Care Act (PPACA) requires most individuals to have health insurance. Families can provide or contribute to a policy for their household employees to help meet this mandate and it’s a great benefit to offer. However, the PPACA does not require employers with fewer than 50 employees to offer a health insurance policy. But employers who choose to do so can benefit from a significant tax savings available through the Health Insurance Tax Credit for Small Employers.

Household employees that wish to purchase coverage on their own can do so through the federal health insurance exchange or the exchange in their state. Subsidies (insurance premium tax credits) will become available to U.S. citizens and legal immigrants with income up to 400% of the federal poverty level who purchase coverage in the new health insurance exchanges. The amount of the subsidy will vary based on income levels. We can help you determine the employee premium subsidies available in your situation.

Health Insurance Tax Credit for Small Employers

Small employers (less than 50 employees) who contribute at least 50% to their employee’s health insurance policy are entitled to a tax credit on that expense – provided the employee’s compensation does not exceed $50,000 and the policy is purchased through SHOP (Small Business Health Options Program). So, in addition to being a non-taxable form of compensation (see Non-Taxable Compensation below), health insurance contributions made by an employer have the added benefit of savings from tax credits.

Household employers can receive a credit of up to 50% of their contribution. The total credit is determined by the average annual salary of the employees. At $25,000, the tax credit is 50% of the contribution. For example, if the Johnsons pay their nanny $25,000 and contribute $350 per month to her health insurance policy, their tax credit would be $2,100 ($350 x 12 = $4,200 x .50 = $2,100).

Additional Notes: As the average annual salary increases above $25,000, the tax credit percentage gradually decreases. In addition to the sliding tax credit percentage, each state has created a ceiling for the contribution portion of the formula based on that state’s average premium cost.

If you’d like an estimate of your tax credit – based on your state ceiling and your tax credit percentage – just give us a call.

 

The information herein is general in nature and may not be applicable to or suitable for your specific circumstances. Accordingly, the information is not intended to be providing legal or tax advice, and should not be relied upon without the advice and guidance of a professional tax or legal advisor.

Next: Non-Taxable Forms of Compensation

Take the
Tour.
See how to take care of
your employer obligations
without work or worry.
Watch (3:20)

Welcome! We’re Here to Help
M-TH 8-6 CST; F 8-5 CST

888-273-3356

Get expert answers
to all your nanny
tax questions.

Partner with HomePay

Learn how we work with Accountants, Attorneys, Financial Advisors and Placement Agencies to expertly handle "nanny tax"
compliance for
your clients.

Tweet
RSS
  • info@myHomePay.com
  • 888-273-3356
  • SERVICE
  • What We Do
  • The HomePay Difference
  • Our Fees
  • FAQs
  • Getting Started
  • ANSWERS
  • Expert Advice
  • Calculators
  • Find a Placement Agency
  • Blog
  • ABOUT
  • Get to Know Us
  • Our Story
  • Our Approach
  • Meet the Team

Privacy Policy Terms of Use Site Map

Care.com HomePay is a service provided by Breedlove & Associates, LLC, a Care.com company.

© Copyright 2015 Breedlove & Associates, LLC

Care.com HomePay is a service provided by Breedlove & Associates, LLC, a Care.com company.

© Copyright 2019 Breedlove & Associates, LLC | Privacy Policy | Terms of Use | Site Map

Follow us:

We are proud to be the household payroll expert for Care.com, the world’s largest online destination for care.

Care.com HomePay