Facts About Colorado's Small Business Health Insurance Tax Credit

Colorado offers small businesses that qualify for a tax credit for the first two years (consecutive) that the company provides health insurance for its employees. The tax credit is designed to help small businesses financially while encouraging them to offer health insurance benefits. The credit can cover up to 50% of the small businesses' group health insurance costs depending on several factors. Non-profit organizations can only reach a maximum tax credit of 35%. The tax credit is received when companies file their annual federal income taxes.

To qualify a Colorado small business must have less than twenty-five full-time equivalent employees. The average wage of the employees must be less than $56,000.00 a year. The simplest way to get this average is to total your business's annual wage output and divide it by the number of employees you have. The employer also must be paying a minimum of 50% of the premium cost for each employee. The numbers can be tricky so keep in mind that if your company is covering 50% of the employee premiums and you get the maximum tax refund, it translates into half of the 50% you are currently paying. That number will scale if you are paying more than 50% of the premiums.

The amount of the tax credit is dependent on the number of employees and their annual compensation. The lower the average annual salary, the higher the tax credit. The number of employees the small business has also factored into the equation. To qualify for the maximum tax credit the company must have fewer than ten employees and the average annual wage needs to be $27,000.00 or less. In Colorado, these tax credits are only available on Kaiser Permanente small group health plans, which limits your choices compared to states that have access to healthcare.gov. However, if you are interested in this program, we would love to help you find out if you qualify.