Did you know that there’s an Obamacare refund for churches? Even if you’re a new church, if you’ve started paying payroll, this might be money you could put back into ministry.
When congress passed Obamacare, they knew it could be hard for smaller employers and nonprofits to make the switch, so they added this lesser-known refund to help us out.
This health care tax credit works for churches that:
- have fewer than 25 full-time equivalent employees
- pay an average wage of less than $51,600 a year, and
- pay at least half of employee health insurance premiums
What if your average wages are more than that? At first blush, your church would seem to be ruled out. But the new Obamacare Insurance Exchanges do not count pastoral housing allowance as wages. It’s unclear to me whether it does or doesn’t count here, but if your housing allowance brings your salary amount under that bar, you might just qualify. Ask a tax professional.
Max Refund Amounts
The scale has changed quite a bit, but here’s what I found on the IRS website:
- for years 2010-13 , the max is 25% of church-paid premiums (average wages must be less than $50,000)
- for 2014, the max is 35% of church-paid premiums
- for 2015, churches can still get 35% back if average wages were $25,800 or less; otherwise the percentage phases out until it disappears entirely when average wages are more than $51,600
- and you can only get a refund for 2 consecutive years beginning in 2014
How to Apply for Obamacare Refund for Churches
Straight from the IRS website:
Gathering the following information will assist you in completing Form 8941, Credit for Small employer Health Insurance Premiums.
- SHOP QHP documentation or letter of eligibility from SHOP, unless transition relief applies
- Numbers of full-time and part-time employees and numbers of hours worked
- Average annual wages for employees
- Employer premiums paid per employee, if applicable
- Relevant K-1s and other pass-through credit information
- Cost of coverage for each employee
- Payroll tax liability – for tax-exempt organizations only
Obviously that’s going to require the help of a bookkeeper or tax guy, but let’s do some simple math: if the church-paid premiums were $500/mo for a year and you got even a 25% refund, that would be $1,500 for the year. It would be worth a few minutes to apply for the Obamacare refund for churches.