What do ACA tax credits do for eligible small businesses?

• A. Provide free coverage for all employees
• B. Make coverage more affordable for employees
• C. Increase payroll taxes
• D. Eliminate all costs for family plans

Answer: (B)

The important idea is that ACA tax credits for eligible small businesses are meant to help make health coverage affordable by offsetting part of the premiums the employer pays for employees. If a small business qualifies (generally 25 or fewer full-time-equivalent employees and average wages below a certain threshold), the credit reduces the employer’s premium costs, lowering the price of coverage that employees pay and encouraging employers to offer insurance. It does not provide free coverage for all employees, it does not raise payroll taxes, and it does not eliminate all costs for family plans. The credit is taken against the employer’s tax liability, effectively subsidizing the cost of offering coverage.