The federal small employer health insurance tax credit is available to employers with:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
The federal small employer health insurance tax credit is limited to employers with 25 or fewer full-time equivalent employees (with average wages below the statutory threshold) who purchase coverage through the Small Business Health Options Program — in California, Covered California for Small Business (CCSB). The credit is designed to make coverage affordable for very small employers. In California, employers must purchase through CCSB to qualify for the federal tax credit, a specific A&H exam point. The credit is phased out as the group grows and as average wages rise, so the 25-full-time-equivalent boundary is the first and most frequently tested screen for eligibility.
Why the other options are wrong
- B) Large employers with more than 500 employees do not qualify; the credit targets very small employers.
- C) The credit generally requires the employer to have employees for whom it pays a portion of the premium; an employer with no staff does not qualify.
- D) The credit is strictly size-limited to 25 or fewer full-time equivalent employees; it is not available at every employer size.
Memory hook
Tax credit for small teams: 25 or fewer full-time equivalents, buying through CCSB.