State RegulationsCA specific✓ Verified · outline & fact-checked · Sep 2026Difficulty 3/5
A California employer with 20 employees wants to claim the federal small business health care tax credit. Under which condition is the employer eligible?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
The federal small business health care tax credit is available to employers with 25 or fewer full-time equivalent employees with average wages below the statutory threshold, but the credit can be claimed only for coverage purchased through the Small Business Health Options Program (SHOP) exchange. In California, that exchange is Covered California for Small Business (CCSB), which serves employers with up to 50 employees. Purchasing outside CCSB forfeits the credit.
Why the other options are wrong
- B) Self-funded plans do not qualify for the credit; the employer must buy coverage through the SHOP exchange.
- C) A private broker may help, but the policy itself must be purchased through CCSB for the employer to claim the credit.
- D) The credit requires comprehensive medical coverage; dental and vision benefits alone do not qualify.
Memory hook
Small employer + SHOP purchase = tax credit. Buy it through CCSB or lose the credit.