Maximizing Tax Credits for Small Business Health Insurance
February 25, 2026 | Tags:
For many small businesses – those with less than 50 employees – offering health insurance can feel like a major financial commitment. But it’s also one of the smartest investments you can make. Beyond helping you attract and retain top talent, choosing the right health plan can unlock meaningful tax savings.
Understanding the Small Business Health Care Tax Credit
Eligible small businesses may qualify for the Small Business Health Care Tax Credit. This is a federal program that helps small employers lower the cost of providing health insurance by covering a portion of their premium contributions. It’s designed for small businesses and can help cover up to 50% of the premium costs you contribute, making health benefits more affordable. To qualify, you need to enroll in a Small Business Health Options Program (SHOP) Marketplace plan and have the following apply to your small business:
- Fewer than 25 full-time employees (FTEs) working 30 hours per week, on average.
- An average employee salary of $65,000 or less per year.
- Contribute at least 50% of your FTEs’ premium costs.
- Offer a quality health plan (QHP) to employees through a SHOP Marketplace.
- Offer SHOP coverage to all FTEs; coverage does not have to be offered to dependents or employees working fewer than 30 hours per week.
What tax-advantaged tools can help my small business save?
Getting employees involved in managing their healthcare can lead to better spending and saving habits while providing tax benefits for your small business. Depending on the insurance plan, additional benefits like a Flexible Spending Account (FSA) and Health Savings Account (HSA) may be available. Medical Mutual offers tax-advantaged FSA and HSA solutions through a single, unified platform designed to help your business and employees save:
- Medical Mutual’s FSA: Allows employees to make pre-tax contributions to pay for medical, dental, vision and other eligible healthcare expenses. As a business, you can save up to 7.65% in combined FICA tax and other federal taxes with every dollar contributed to an FSA.
- Medical Mutual’s HSA: Employee-owned, which allows them to make pre-tax contributions that roll over from year to year with no limit. HSAs are available with our qualified high-deductible health plans (QHDHPs) and come with easy enrollment options, plus a low $1,000 investment threshold, giving employees the opportunity to earn more through early investment.
Ready to start saving?
Offering health insurance isn’t just a way to support your employees’ health needs – it's a strategic financial tool that can significantly reduce your business’s tax burden. By understanding these programs, you can lower costs while still supporting your team. For more information, contact your broker or request a Sales consultation with our dedicated small group representative. If you don't have a broker, visit our Employers page to learn more about our group plans.
This content is provided by Medical Mutual and is for educational purposes only. Eligibility and coverage are subject to the specific terms of your benefit plan.