Connecticut · Small Business · 2026
Connecticut ICHRA Tax Credit: The 2026 Small Business Guide
Connecticut just made it cheaper to offer health benefits. The new Connecticut ICHRA tax credit can put up to $1,000 per employee back in your pocket. Here’s who qualifies, how to claim it, and how to move fast before the $5 million pool runs out.
The short answer
Connecticut became one of the first states in the country to reward small employers for dropping expensive group plans in favor of an ICHRA (Individual Coverage Health Reimbursement Arrangement). Here’s what you need to know at a glance:
What is the new Connecticut ICHRA tax credit?
In May 2026, Connecticut passed Public Act 26-68, the state’s fiscal year 2027 budget adjustment bill. Tucked inside that budget is a brand-new incentive: a state tax credit that helps eligible small businesses offset the cost of offering an ICHRA instead of a traditional group health plan.
It’s a notable move. Connecticut is among the first states in the nation to put real money behind ICHRAs, signaling that lawmakers see personalized, individual-market coverage as a sustainable way to expand access without the runaway costs of small-group insurance.
The credit is administered by the Connecticut Department of Revenue Services. In most cases, you can use it to reduce several state taxes, including the corporation business tax, the insurance and health care center taxes, and the state income tax.
Bottom line: If you’re a Connecticut small business owner who’s tired of group-plan renewals, the state will now help pay you to switch to a more flexible benefit — but only for a limited time and a limited budget.
How much is the Connecticut ICHRA tax credit worth?
The credit equals the lesser of these two amounts:
- The total qualified ICHRA contributions you made during the tax year, or
- $1,000 per covered employee.
A “qualified contribution” is simply the amount you put toward an employee’s ICHRA during the year. A “covered employee” is any employee who actually receives one of those contributions.
maximum state tax credit per covered employee, per year
A few important limits to plan around:
- Two years only. The credit is available for the first taxable year you offer the ICHRA and the year right after.
- A $5 million statewide cap. Total credits are limited to $5 million per year across all Connecticut businesses, so timing matters.
- Nonrefundable. You can use it to lower your tax bill, but any unused portion expires — it won’t come back to you as a refund.
Estimate your Connecticut ICHRA tax credit
Enter your numbers to see a quick estimate of your potential credit. This is an illustration, not a guarantee — your actual credit depends on your contributions and the statewide cap.
Capped at $1,000 per covered employee (12 employees).
Over the full two-year credit window, an eligible employer at this level could claim up to roughly $24,000 in total — subject to the $5M statewide cap and your DRS certification.
Who qualifies for the Connecticut ICHRA tax credit?
Eligibility is refreshingly straightforward. To claim the Connecticut ICHRA tax credit, your business must check two boxes:
How you claim it depends on your business structure:
- S corporations and partnerships: the shareholders or partners may claim the credit.
- Single-member LLCs (disregarded entities): the owner claims the credit directly.
Not sure whether your setup qualifies? That’s exactly the kind of question the team at B&A Benefit Solutions walks Connecticut owners through every day.
How to apply for the Connecticut ICHRA tax credit
You can’t simply claim this credit on your return — you have to reserve it in advance with the state. Here’s the process, step by step:
Move early. With only $5 million available statewide each year and a first-come, first-served rule, the businesses that apply the moment applications open are the ones most likely to lock in their credit. Waiting could mean missing out for the year.
What exactly is an ICHRA?
An ICHRA — Individual Coverage Health Reimbursement Arrangement — lets you reimburse employees, tax-free, for individual health insurance premiums and qualified medical expenses, instead of buying one group plan for everyone.
The federal government finalized the rules for ICHRAs in 2019. Since then, employers of every size have adopted them as a flexible, budget-friendly alternative to group coverage. Employees shop for the individual plan that fits their own doctors and prescriptions (often through Access Health CT), and you simply set the monthly allowance.
The result: predictable costs for you, real choice for your team, and far less administrative headache than a traditional plan.
ICHRA vs. traditional group health insurance in Connecticut
Here’s how the two approaches stack up for a typical Connecticut small business:
Why Connecticut small businesses are switching to ICHRAs
For many owners with lean HR teams and tight budgets, group coverage has simply become too expensive and too much to manage. Beyond the new tax credit, here’s why ICHRAs are gaining ground across the state:
- Better cost control. Decide exactly how much to contribute each month — and even vary allowances by employee class.
- Lower overall costs. In several Connecticut counties, individual premiums run cheaper on average than small-group plans.
- Greater employee choice. Workers keep their own doctors and prescriptions instead of being boxed into one plan.
- Less admin. No more carrier negotiations or renewal scrambles.
- Built to scale. ICHRAs flex with growing, remote, and multi-state teams.
Recent average monthly ICHRA contribution to a single employee — below the $592 average monthly employer cost for single group coverage in Connecticut.
Do you have to use Access Health CT’s BusinessPlus?
Short answer: not according to the law itself. Access Health CT‘s BusinessPlus platform is a popular new option built to help Connecticut employers manage ICHRAs — but the text of Public Act 26-68 doesn’t require you to use BusinessPlus, or any specific state-run platform, to receive the credit.
This has caused some understandable confusion, since earlier communications from state officials referenced BusinessPlus when the program was still being proposed. As the program develops, the state may release additional guidance. In the meantime, you’re free to administer your ICHRA through a qualified vendor or broker of your choice — like B&A.
Get your free ICHRA tax credit eligibility review
Tell us a little about your business and a licensed B&A advisor will check whether you qualify for the Connecticut ICHRA tax credit — and help you apply before the funds run out. Licensed in Connecticut & New York.
Or email BNA@insuranceiswhatwedo.com · No obligation, ever.
Connecticut ICHRA tax credit: frequently asked questions
Don’t leave $1,000 per employee on the table
The $5 million pool is first-come, first-served — and once it’s gone for the year, it’s gone. Let B&A Benefit Solutions design your ICHRA and help you claim the credit before time runs out.
Start My Free Eligibility Review
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This article is for general informational purposes only and does not constitute legal, tax, or financial advice. Program details are based on Connecticut Public Act 26-68 and may change as the state issues additional guidance. Please consult a licensed CPA, tax advisor, or B&A Benefit Solutions for guidance specific to your business.
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