Your Church may be Eligible for Credit for Small Employer Health Insurance Premiums
2010 IRS Filing deadline: May 15, 2011
As part of the Patient Protection and Affordable Care Act of 2010, the Federal Government gives a tax credit to certain small employers that provide health care coverage to their employees, effective with tax years beginning in 2010. Your church may be able to take this credit.
You may ask “How can a church take advantage of this employee health insurance cost credit?” The general rule is that churches don’t file income tax returns. The IRS has provided a method by which a qualifying church can file for and receive a refund of a portion of the cost to provide health insurance to their employees.
Eligibility Rules:
- Providing health care coverage. A qualifying employer must cover at least 50 percent of the cost of health care coverage for some of its workers based on the single rate.
- Firm size. A qualifying employer must have less than the equivalent of 25 full-time workers (for example, an employer with fewer than 50 half-time workers may be eligible).
- Average annual wage. A qualifying employer must pay average annual wages below $50,000.
Note: Ministers, if issued a w2, are included in the worker count, but not in the average annual wage calculation since they are considered self-employed for withholding purposes.
Amount of Credit:
The credit is worth up to 35 percent of a small business' premium costs in 2010 (25% for tax-exempt employers). On Jan. 1, 2014, this rate increases to 50 percent (35 percent for tax-exempt employers). The credit phases out gradually for firms with average wages between $25,000 and $50,000 and for firms with the equivalent of between 10 and 25 full-time workers.
Attached is information regarding eligibility and applying for the credit. We encourage you to read this information and take advantage of this credit if your church qualifies.