Form 8941: The Small Employer Health Insurance Credit
Published November 5, 2026
Form 8941 is used by eligible small employers to figure the credit for health insurance premiums they pay for employees. The credit is part of the general business credit. This page covers tax year 2025, using the 2025 instructions. IRS: Form 8941 (2025)
The size test
The instructions say you must have fewer than 25 full-time equivalent employees (FTEs) for the tax year. You may still qualify with 25 or more employees if the FTE count is lower. For example, 48 half-time employees equal 24 FTEs. The instructions also warn that an employer with exactly 25 FTEs is not eligible, because the credit phases out. IRS: Instructions for Form 8941 (2025)
The wage test
You must have paid average annual wages of less than $67,000 per FTE for the tax year. If you had more than 10 FTEs and average annual wages above $33,000, the instructions say the FTE and wage limits reduce your credit separately. Worksheets 1 and 3 in the instructions show the math. IRS: Instructions for Form 8941 (2025), Worksheets 1 and 3
The premium test
You must pay premiums for employee health insurance under a qualifying arrangement. Generally, that means you pay a uniform percentage of at least 50% of the premium cost for each enrolled employee. Some other arrangements can still qualify. The instructions describe these in the Qualifying Arrangement section. IRS: Instructions for Form 8941 (2025), Qualifying Arrangement
How much credit
For most eligible small employers, the maximum credit is 50% of the premiums paid. Tax-exempt eligible small employers have a maximum of 35%, which is limited to certain payroll taxes. The instructions also say the credit is available for a two-consecutive-tax-year credit period. IRS: Instructions for Form 8941 (2025), general instructions
Lines on the form
- Line 2: Enter your FTEs for the tax year.
- Line 10: Enter state premium subsidies and state tax credits for the premiums.
- Line 19: Enter the payroll taxes you paid in 2025 that count for this credit.
The form's full line-by-line process is in the instructions. Use them to work through each line. IRS: Form 8941 (2025)
Where the credit goes
For most employers, the credit is claimed on Form 3800, General Business Credit. Read Form 3800 basics to see how it is reported. The instructions also say the credit is part of the general business credit. IRS: Instructions for Form 8941 (2025)
Health plan details
The instructions note that for information about plans offered through a Small Business Health Options Program (SHOP) Marketplace, you can go to Healthcare.gov. Check your plan details with your insurer or the marketplace before you figure the credit. IRS: Instructions for Form 8941 (2025), Note on SHOP Marketplace
Steps to follow
- Count your FTEs for 2025.
- Confirm the premium arrangement meets the uniform percentage rule.
- Check your average annual wages per FTE against the limit.
- Complete Form 8941, then carry the result to Form 3800.
Records to keep
Keep your payroll records for the year, your FTE count for the year, and the premium statements from your insurer. Keep records of any state premium subsidies or state tax credits, because line 10 asks for them. IRS: Form 8941 (2025), lines 2, 10, and 19
Common mix-ups
- Part-time employees count as a fraction of an FTE. The instructions give the example of two half-time employees counting as one FTE.
- Having 25 FTEs is not the same as being under the limit. The instructions say an employer with exactly 25 FTEs is not eligible.
- A tax-exempt employer that is not described in section 501(c) is generally not eligible for this credit. IRS: Instructions for Form 8941 (2025), general instructions
Related reading
Read Form 8846 for another credit in the same family. Read Schedule 3 to see where nonrefundable credits go on your return.
General information, not advice for your situation.
Sources: Sources: IRS, Form 8941 (2025), Credit for Small Employer Health Insurance Premiums (https://www.irs.gov/pub/irs-pdf/f8941.pdf); IRS, Instructions for Form 8941 (2025) (https://www.irs.gov/pub/irs-pdf/i8941.pdf) This is general information, not advice about your specific return.
