Most Florida small business owners have heard vaguely that there's a tax credit for offering health insurance. Far fewer have actually claimed it. The Small Business Health Care Tax Credit under IRC Section 45R is one of the most generous — and most underutilized — tax benefits available to Florida employers with fewer than 25 employees. The catch: you have to purchase coverage through SHOP, and the credit is capped at two years. This guide explains exactly who qualifies, how to calculate your credit, and how to claim it on Form 8941.
Congress created the Small Business Health Care Tax Credit in 2010 as part of the Affordable Care Act to make it financially feasible for small employers to offer health insurance. The credit directly offsets the employer's federal tax liability — it's a dollar-for-dollar reduction, not just a deduction.
For tax years 2014 and beyond:
The credit is calculated on Form 8941 (Credit for Small Employer Health Insurance Premiums) and flows to the business return (or to the partners/shareholders on Schedule K-1 for pass-throughs).
Shopping group health for your team
All four of the following requirements must be met:
Count full-time equivalents (FTEs), not headcount. A full-time employee working 40 hours/week = 1 FTE. Two part-time employees each working 20 hours/week = 1 FTE. Seasonal workers who work fewer than 120 days per year are excluded from the FTE count. Owners (sole proprietors, partners, more-than-2% S-corp shareholders, C-corp shareholders owning more than 5%) and their family members are also excluded from the FTE count and from premium calculations.
Calculate average annual wages by dividing total W-2 wages (excluding owner wages) by the number of FTEs. For 2026, the full credit begins phasing out when average wages exceed approximately $27,000, and fully phases out at approximately $56,000. The exact 2026 indexed amounts are published by the IRS annually.
Coverage must be purchased through the SHOP (Small Business Health Options Program) marketplace — accessible at HealthCare.gov/small-businesses in Florida. Direct-carrier purchases and broker-arranged coverage outside SHOP don't qualify. Florida is a federally facilitated SHOP state.
The employer must pay a uniform percentage of the premium for all enrolled employees — at least 50% of the employee-only (not family) premium amount. The contribution percentage must be the same for all employees (with minor exceptions for part-time employees).
Form 8941 walks through the calculation in six parts. Here's the simplified version:
| Step | What to do |
|---|---|
| 1 | Calculate your FTE count (total hours ÷ 2,080, capped at 25) |
| 2 | Calculate average annual wages (total wages ÷ FTEs) |
| 3 | Determine premiums paid (employer-only portion, excluding owner premiums) |
| 4 | Limit premiums to the average SHOP premium in your area |
| 5 | Apply the 50% credit rate (or 35% for nonprofits) |
| 6 | Apply FTE phase-out and wage phase-out reductions |
The credit is available for two consecutive taxable years beginning after 2013. The IRS counts these as any two consecutive years in which you purchase SHOP coverage and claim the credit. Once you've used your two-year window, the credit is no longer available for that business — even if you continue offering SHOP coverage.
Strategic implication: If you are a new Florida small business that recently started offering health insurance, you should understand whether you've started your two-year clock yet. If you haven't claimed it, you still have both years available. If you've claimed it once, you have one year remaining. After both years, consider whether it still makes financial sense to use SHOP vs. transitioning to a direct-carrier group plan.
There is an important interaction between the credit and the deduction: you cannot deduct the portion of premiums for which you claim a credit. The credit reduces your deductible premium amount dollar for dollar. However, a credit is worth more than a deduction — a $1 credit reduces tax by $1, while a $1 deduction at a 24% rate only reduces tax by $0.24. The credit still wins even with the deduction reduction.
File IRS Form 8941 with your business return:
For more on structuring SHOP coverage, see our SHOP marketplace guide for Florida. For the broader landscape of small business health tax write-offs, see our Florida small business health insurance tax deduction guide. For the Section 125 cafeteria plan that can be layered on top, see our Section 125 guide.
Thinking about SHOP coverage to claim the tax credit? Our licensed Florida advisors help small businesses navigate SHOP enrollment and maximize their health insurance tax benefits.
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