Health Insurance Credit US Churches
Last May I blogged about the health insurance credit available for small tax exempt organizations under the Patient Protection and Affordable Care Act. This credit is designed to encourage these organizations to offer health insurance coverage to their employees for the first time or to maintain coverage they already offer. US churches may qualify for this "health insurance credit" for 2011 also. The credit is up to 25% of the cost of qualifying health insurance premiums. This is defined as the premiums paid directly or reimbursed to church employees. You may qualify if your church has:
1) 25 or less full-time equivalent employees (ministers may or may not be considered an employee--check the instructions for the 8941, p. 2)
2) average annual wages of $50,000 or less (for credit purposes, a minister is an employee or self-employed as determined under the common law test).
The credit is limited to non-voluntary income taxes withheld (most ministers' are self-employed so their withholding is voluntary and therefore they are not eligible), and the employee and church portion of the FICA Medicare taxes. Check out the IRS site for additional information and to check if your church may be eligible. Form 8941 is the worksheet for determining eligibility and you would claim the credit on Form 990-T, line 44f.
Do you think you don't qualify for this because you don't pay taxes? NO. You may get a credit of income taxes and medicare taxes. For example, if your church had 6 full-time equivalent staff (including the minister), total wages of $240,000 ($40,000 average), withheld qualifying taxes totaling $9,000, and paid health insurance premiums for 4 of the staff members totaling $25,000, you could receive a credit toward your payroll taxes of $2,500. The credit is graduated from 25% if the average wage is $25,000 to 0% if the average wage is $50,000. Check out the instructions for Form 8941 for more information on how this is calculated.
It will take some work to tackle all the details but for $2,500 in our example, it seems like this is something some churches will want to pursue if you haven't done so already. Finally, this credit is available for the next few years and the credit increases to 35% in 2014.
Let me know if your church has checked this out and applied for the credit or if you do so by the 2011 filing deadline of May 15. Check out last year's blog for comments from other churches regarding the credit.
The above is basic information and is not considered tax advice. I hope this information assists your church in at least looking at this possible benefit for your ministry.