Qualified Small Employer Health Reimbursement Arrangement (QSEHRA): Premium Tax Credit (2025 IRS Guide)

This guide covers “Qualified Small Employer Health Reimbursement Arrangement (QSEHRA)” within premium tax credit. The following material presents the IRS treatment of this topic, including the qualifications, exceptions, and examples in the source section. Read the rules alongside the facts of your own situation before deciding what to report, deduct, or document.

Adapted from Publication 974 (2025), Premium Tax Credit (PTC), published by the Internal Revenue Service. This guide retains the source edition’s years, amounts, deadlines, and examples. It is guidance for that edition, not a statement that the same figures apply to every tax year.

Context for these rules

Under the health care law, certain health coverage is called MEC. You generally cannot take the PTC for an individual in your tax family for any month that the individual is eligible for MEC, except for individual market coverage (defined below). MEC includes the following.

• Individual market coverage (including qualified health plans).

• Most coverage through government-sponsored programs (including Medicaid coverage, Medicare Part A or C, the Children’s Health Insurance Program (CHIP), certain benefits for veterans and their families, TRICARE, and health coverage for Peace Corps volunteers).

• Most types of employer-sponsored coverage.

• Grandfathered health plans.

• Other health coverage designated by the Department of Health and Human Services (HHS) as MEC.

Qualified Small Employer Health Reimbursement Arrangement (QSEHRA)

Under a QSEHRA, an eligible employer can reimburse eligible employees for medical expenses, including premiums for a qualified health plan purchased through the Marketplace. An eligible employer is one that, in general, employs fewer than 50 full-time employees and does not offer a group health plan.

A QSEHRA is an arrangement that meets all the following requirements.

1. The arrangement is funded solely by the employer, and no salary reduction contributions may be made under the arrangement.

2. The arrangement provides, after the eligible employee provides proof of coverage, for the payment or reimbursement of the medical expenses incurred by the employee or the employee’s family members.

3. The amount of payments and reimbursements doesn’t exceed $6,350 ($12,800 for family coverage) for 2025.

4. The arrangement is generally provided on the same terms to all eligible employees. However, the employer’s QSEHRA may exclude employees who haven’t completed 90 days of service, employees who haven’t reached age 25 before the beginning of the plan year, part‐time or seasonal employees, employees covered by a collective bargaining agreement if health benefits were the subject of good-faith bargaining, and employees who are nonresident aliens with no earned income from sources within the United States.

If you are provided a QSEHRA, and it is considered affordable coverage for a month, no PTC is allowed for that month. If the QSEHRA is not considered affordable coverage for 1 or more months, you may still be eligible for the PTC. If you are eligible for the PTC for any month for which you are provided a QSEHRA, you must reduce your PTC (but not below -0-) for that month by the monthly QSEHRA permitted benefit amount. The monthly permitted benefit amount is the maximum QSEHRA benefit amount an eligible employee is allowed per month. See Permitted benefit reported on Form W-2, later, and Worksheet Q for more information.

Written notice of QSEHRA.

If you were provided a QSEHRA during 2025, your employer should have provided written notice to you by the later of October 3, 2024, or 90 days before the first day of the plan year of the QSEHRA, or if you’re an employee who is not eligible to participate at the beginning of the year, the date on which you’re first eligible to participate in the QSEHRA. The information in this notice is necessary to determine how the QSEHRA affects your PTC. The permitted benefit for self-only coverage as reported by the employer in the written notice is used to determine whether the QSEHRA is considered affordable coverage, regardless of whether the permitted benefit provided to you is for self-only or family coverage. If the notice provided to you does not include a permitted benefit amount for self-only coverage, you must contact your employer to get that information. Use Worksheet N to determine whether your QSEHRA is considered affordable coverage for the months of the year that you were provided the QSEHRA. You will need the notice provided by your employer and the permitted benefit for self-only coverage to complete Worksheet N.

Permitted benefit reported on Form W-2.

Your employer should have reported your annual permitted benefit (self-only or family amount, as applicable) in box 12 of your Form W-2 with code FF. Your permitted benefit amount, as reported to you by your employer on Form W-2, is used to calculate the amount by which you must reduce your PTC, if you are otherwise eligible for the PTC. Use Worksheet Q to figure your monthly PTC for months in which you were provided a QSEHRA.

APTC for 2025 and 2026.

If APTC was paid for your 2025 Marketplace coverage, your QSEHRA permitted benefit for 2025 was not considered by the Marketplace in calculating the amount of your 2025 APTC. Furthermore, if you requested APTC for your 2026 Marketplace coverage, the Marketplace did not consider your 2026 permitted benefit in calculating the amount of your 2026 APTC. If you are provided a QSEHRA for 2026, you should contact the Marketplace and ask the Marketplace to reduce the amount of APTC to be paid on your behalf for 2026 to limit the risk of having excess APTC for 2026.

Worksheet N. Worksheet To Determine if the QSEHRA Is Considered Affordable Keep for Your Records

Note: See Special instructions for Worksheet N if your SLCSP premium was not the same for all months of 2025 or you changed employers during 2025.

Special instructions for Worksheet N if you did not have the same SLCSP for all months of 2025 or changed employers during 2025.

You must complete a separate worksheet through line 8 for each part of the year in which you had a different SLCSP premium for self-only coverage while provided a QSEHRA, or you were provided a QSEHRA from different employers with different self-only permitted benefits. For example, Bob was employed for all of 2025 by an employer that provides a QSEHRA to its employees. Bob changed Marketplace policies in May of 2025 because of a change in residence. As a result, Bob’s SLCSP premium for self-only coverage was different for the period January through May than for the period June through December. To determine the affordability of the QSEHRA provided to Bob, Bob must complete a separate Worksheet N for the period January through May and the period June through December.

Once you have completed the separate worksheets through line 8, read the following.

• If the Worksheets N show that the QSEHRA is unaffordable for at least 1 month (line 4 is less than line 8 on at least one of the worksheets), skip lines 9 through 13 and complete Worksheet Q.

• If the Worksheets N show that the QSEHRA is affordable for all months of 2025 (line 4 is greater than or equal to line 8 on all the worksheets), follow the instructions on line 9 of the worksheet relating to “If line 4 is greater than or equal to line 8.” Complete lines 10 through 13 if you are instructed to do so.

Part‐year coverage—instruction for line 6.

If you were provided a QSEHRA for less than 12 months in 2025, the written notice your employer sent to you may have provided the self-only coverage permitted benefit for only the months you were provided the QSEHRA or the self-only coverage permitted benefit for the entire year (if the notice provided to you does not include a permitted benefit amount for self-only coverage, you must contact your employer to get that information). If the notice provided the permitted benefit amount just for the months you were provided the QSEHRA, then enter that amount on line 6. If the notice provided the self-only coverage permitted benefit for the entire year, figure the amount to enter on line 6 as follows.

1. Divide the self‐only coverage permitted benefit for the entire year by 12.0.

2. Multiply the result by the number of months you were provided the QSEHRA.

Worksheet Q. Worksheet To Figure Monthly Credit Amount if You Have a QSEHRA Keep for Your Records

Using the guidance

Keep the documents that establish the dates, amounts, and circumstances described above. References to other chapters, forms, worksheets, or earlier and later sections refer to the linked IRS publication. Check the full publication and its updates before relying on a rule for a different tax year or a situation not addressed here.

Sources and further reading

• Publication 974 (2025), Premium Tax Credit (PTC): Minimum Essential Coverage (MEC) — Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) — Internal Revenue Service; 2025 edition.

The cited U.S. government text is in the public domain. Source accessed October 28, 2026. Fynoptic has organized this material for educational use and is independent of, and not endorsed by, the IRS.