OUR THOUGHTS ON:

Tax-Exempt Organizations Eligible for Small Business Healthcare Tax Credit

Not-for-Profit

By Tod Wilson

Beginning January 1, 2010, eligible small businesses, including tax-exempt organizations, may take a refundable credit to cover the cost of employees’ health insurance premiums. Passed as part of the Patient Protection and Affordable Care Act last March, the credit was designed to encourage small businesses and small tax-exempt organizations to provide or maintain health insurance coverage for their employees.

The credit for tax-exempt employers can be up to 25% of premiums paid for tax years 2010 to 2013. After that, the potential credit increases to 35%. The credit is figured on Form 8941, which is attached to the tax-exempt entity’s Form 990-T.

To qualify for the credit, the tax-exempt employer must have fewer than 25 full-time equivalent employees and average annual wages of its employees cannot exceed $50,000. The employer must pay at least 50% of the cost of the premiums for each employee enrolled in healthcare coverage provided by the employer. HSAs, HRAs and FSAs are considered self-insured plans and are not health insurance coverage for purposes of the credit.

The following example illustrates how the credit is calculated for a small tax-exempt organization with 10 full-time workers with average annual wages of $24,000. If yearly healthcare premiums are $80,000, the organization’s refundable credit for 2010 would be $20,000 ($80,000 x 25%). For 2014, the organization’s credit would be $28,000 ($80,000 x 35%). Remember, this is a refundable credit, and regardless of the fact that your organization is tax-exempt, you are eligible to receive a refund equal to your credit if you meet the strict IRS requirements.

For more information on how to claim the new Small Business Healthcare Credit, please contact Tod Wilson at twilson@schneiderdowns.com or your Schneider Downs representative at (614) 621-4060 (Columbus or (412) 261-3644 (Pittsburgh).

 

Schneider Downs provides accountingtax, wealth management, technology and business advisory services through innovative thought leaders who deliver the expertise to meet the individual needs of each client. Our offices are located in Pittsburgh, PA and Columbus, OH. 

This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax-related matter.

You’ve heard our thoughts… We’d like to hear yours

The Schneider Downs Our Thoughts On blog exists to create a dialogue on issues that are important to organizations and individuals. While we enjoy sharing our ideas and insights, we’re especially interested in what you may have to say. If you have a question or a comment about this article – or any article from the Our Thoughts On blog – we hope you’ll share it with us. After all, a dialogue is an exchange of ideas, and we’d like to hear from you. Email us at contactSD@schneiderdowns.com.

Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

© 2018 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

comments