Updated November 5, 2026. Quick answer: For taxable years beginning in 2027 the dollar amount in effect under section 45R(d)(3)(B) is $35,162.04, up from $34,100 for 2026, per Rev. Proc. 2026-35, section 3.10. It is not the credit itself. It is the wage yardstick for the small employer health insurance credit: to be an eligible small employer, average annual wages cannot exceed twice the amount, $70,324.08 (computed), and the credit shrinks as average wages rise above the amount itself.
The 2027 amount
The Revenue Procedure states: “For taxable years beginning in 2027, the dollar amount in effect under § 45R(d)(3)(B) is $35,162.04.” It adds: “This amount is used under § 45R(c) for limiting the small employer health insurance credit and under § 45R(d)(1)(B) for determining who is an eligible small employer for purposes of the credit.”
| Year | Dollar amount under section 45R(d)(3)(B) | Twice the amount (average wage ceiling) | Source |
|---|---|---|---|
| 2026 | $34,100 | $68,200 (computed) | Rev. Proc. 2025-32, section 4.09, small employer health insurance expense item |
| 2027 | $35,162.04 | $70,324.08 (computed) | Rev. Proc. 2026-35, section 3.10, small employer health insurance expense item |
How the statute uses the amount
An eligible small employer, in the statute’s words, is one “which has no more than 25 full-time equivalent employees for the taxable year,” and “the average annual wages of which do not exceed an amount equal to twice the dollar amount in effect under paragraph (3)(B) for the taxable year,” and which has a qualifying contribution arrangement.
The credit is then reduced in two steps. For employee count, the statute multiplies the credit by “the total number of full-time equivalent employees of the employer in excess of 10 and the denominator of which is 15.” For wages, it multiplies the credit by a fraction whose “numerator of which is the average annual wages of the employer in excess of the dollar amount in effect under subsection (d)(3)(B) and the denominator of which is such dollar amount.”
A worked wage reduction for 2027
Suppose an employer’s average annual wages, rounded down to a multiple of $1,000 as the statute requires, are $50,000 (invented, for the computation). The excess over the 2027 amount is $50,000 minus $35,162.04, or $14,837.96 (computed). Divided by $35,162.04 that is 0.4220 (computed), so the wage step removes about 42 percent of the credit before the employee-count step. An employer at $35,000 or below loses nothing to this step. These are illustration numbers, not a prediction for any employer.
How big the credit is, and where it goes
The credit equals “50 percent (35 percent in the case of a tax-exempt eligible small employer)” of the employer’s nonelective contributions, subject to the limits above. It runs for a short window: “the 2-consecutive-taxable year period beginning with the 1st taxable year in which the employer (or any predecessor) offers 1 or more qualified health plans to its employees through an Exchange.”
The IRS instructions say: “The credit is claimed as part of the general business credit on Form 3800, General Business Credit.” For tax-exempt employers the instructions say the credit is “claimed as a refundable credit on Form 990-T”. The plans must be offered through “a Small Business Health Options Program (SHOP) Marketplace”.
Common mistakes
- Treating $35,162.04 as the credit amount. It is a wage yardstick, and the credit is a percentage of the employer’s premium contributions.
- Testing average annual wages against the dollar amount alone. Eligibility uses twice the amount; the dollar amount alone starts the reduction.
- Counting a full-time equivalent as every employee. The statute divides total hours of service by 2,080 and rounds down.
- Forgetting that the credit is limited to a two-year period once the employer first offers a plan through the Exchange.
Related: Form 3800, the general business credit, the QSEHRA limit for 2027, the ACA affordability percentage for 2027, and the employer-provided child care credit for 2027.
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Answer againSources
- Internal Revenue Service, Rev. Proc. 2026-35, tax year 2027 inflation-adjusted items: www.irs.gov
- Internal Revenue Service, Rev. Proc. 2025-32, tax year 2026 inflation-adjusted amounts, as modified by the One, Big, Beautiful Bill Act: www.irs.gov
- 26 U.S.C. 45R, Employee health insurance expenses of small employers (U.S. Code, 2024 edition, U.S. Government Publishing Office): www.govinfo.gov
- Internal Revenue Service, Instructions for Form 8941 (2025), Credit for Small Employer Health Insurance Premiums: www.irs.gov
Read from the primary documents linked above on November 5, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer or the IRS itself is the right place to confirm anything consequential.