Update on Health Insurance Tax Credit for Churches and Nonprofits

On May 5, 2011 the IRS updated information on its website related to the health insurance tax credit. For purposes of determining eligibility for the credit, ministers who are treated as employees are included in the calculation of full-time employees. The health insurance premiums paid for employee ministers are also included when calculating the credit. However, for purposes of determining average annual wages, the compensation paid to ministers is not included. Minister’s wages are not subject to FICA, and are thus excluded from the definition of “wages” for purposes of the credit. Generally, tax exempt organizations with fewer than 25 full-time equivalent employees and average wages less than $50,000 are eligible for the tax credit or a portion of the credit. The credit is refundable and is limited to the amount of required federal income tax withholdings from payroll and the employer share of Medicare tax.

Visit the IRS website to read more at http://www.irs.gov/newsroom/article/0,,id=220839,00.html.