Tools

Small business health care tax credit calculator

Estimates the IRC 45R credit the way Form 8941 does: up to 50% of premiums (35% for tax-exempt employers), reduced by the FTE and average-wage phase-outs.

Runs entirely in your browser: nothing you enter is sent or stored by this site. Results are estimates for planning, not a quote or advice.

Employers with fewer than 25 full-time equivalent employees and modest average wages can claim a tax credit for health premiums they pay. This tool follows the Form 8941 worksheets to estimate it. It opens with example figures, not yours.

How to use it

  1. Tax year and employer type. 2025 or 2026, and a box to check if you are a tax-exempt employer (the credit is 35% instead of 50%).
  2. FTEs. Total hours of service divided by 2,080, with no more than 2,080 counted for any one employee, rounded down. You can type the FTE count, or type total hours and let the tool compute it. Do not count owners, partners, 2% S corporation shareholders, more-than-5% owners or their family members. If you enter total hours, cap each person at 2,080 first.
  3. Total wages paid to those same employees: wages subject to Social Security and Medicare tax, without the wage base limit. Use payroll records.
  4. Premiums paid by the employer for the year, for coverage bought through the SHOP Marketplace, excluding amounts employees paid by salary reduction. Your invoices and payroll deduction records show it.
  5. Employer's share of each employee's premium. It must be a uniform 50% or more.
  6. Average premium limit (optional). Employees enrolled in employee-only and in family coverage, and the average premium for your rating area from the table at the end of the Form 8941 instructions.
  7. Payroll taxes, shown only for tax-exempt employers: income tax withheld plus employee and employer Medicare tax.

The math

  1. Average wage = total wages ÷ FTEs, rounded down to the nearest $1,000.
  2. Premiums counted = the smaller of premiums paid and the average-premium limit (enrollees × area average × your percentage). Without a limit entered, premiums paid.
  3. Credit before phase-outs = 50% (or 35%) × premiums counted.
  4. FTE reduction = that credit × (FTEs − 10) ÷ 15, if you have more than 10 FTEs.
  5. Wage reduction = that credit × (average wage − T) ÷ T, if the average wage is above T, where T is the year's average-wage amount: $33,300 for 2025 and $34,100 for 2026.
  6. Credit = step 3 − step 4 − step 5, not below zero. A tax-exempt employer's credit cannot exceed its payroll taxes.

A hypothetical example with the opening numbers (2026): 8 FTEs, $280,000 in wages and $48,000 in premiums. The average wage is $35,000. The base credit is 50% × $48,000 = $24,000. There is no FTE reduction. The wage reduction is $24,000 × ($35,000 − $34,100) ÷ $34,100 = $633, so the credit is about $23,367.

Assumptions and limits

  • The credit ends at 25 FTEs or at an average wage of twice T ($68,200 for 2026). The tool flags both, along with an employer share below 50%.
  • Coverage must be a qualified health plan bought through the SHOP Marketplace, and the credit is available for only two consecutive tax years. The Form 8941 instructions explain when those rules apply.
  • The tool trusts your FTE and wage counts. Deciding who is a covered employee, and who is excluded as an owner or family member, is the hard part.
  • It does not work out how the credit interacts with your deduction for the same premiums, or with other business credits. Have a CPA run it.
  • Treat the result as an estimate to take to your tax preparer, who will complete Form 8941.

Read The small business health care tax credit (Form 8941): rules and 2026 figures and The SHOP Marketplace for small employers: how it works in 2026 for how the credit works and how to enroll. If SHOP coverage is not the right fit, compare a QSEHRA with the QSEHRA and ICHRA allowance calculator. The glossary defines a full-time equivalent.

Where the figures come from

Last reviewed October 10, 2026

Related guides

The small business health care tax credit (Form 8941): rules and 2026 figures Who qualifies for the IRC 45R credit, how the 50% credit is reduced by FTEs and wages, the 2026 wage threshold of $34,100, the SHOP rule and how to claim. The SHOP Marketplace for small employers: how it works in 2026 What SHOP coverage is, who qualifies, why employers now enroll through brokers or insurers instead of HealthCare.gov, and how it ties to the 45R tax credit. Group health insurance for small businesses: how it works and what it costs How small-group health coverage is sold, rated and administered: eligibility, contribution rules, enrollment, plan options and the ACA rules that shape it. QSEHRA explained: the small employer HRA, 2026 limits and rules How a QSEHRA works for employers under 50 full-time employees: 2026 limits ($6,450 and $13,100), eligibility, notice, W-2 reporting and tax credit effects.

Terms used here

Full-time equivalent (FTE) A way to convert part-time hours into the number of full-time workers they equal, used to decide whether the ACA employer mandate or a tax credit applies. Applicable large employer (ALE) Under the ACA, an employer with an average of 50 or more full-time and full-time-equivalent employees in the prior year, subject to the employer mandate.

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