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Credit for Small Employer Health Insurance Premiums

Posted 2:18 AM by

Small nonprofit organizations may be eligible for a tax credit for health insurance premiums paid for tax years beginning in 2010. For tax-exempt small employers, the credit is 25 percent of employer paid premiums, is limited to the amount of certain payroll taxes paid, is limited to the state average premium chart, and cannot exceed the amount of payroll taxes for the organization.
A nonprofit is an eligible small employer if it meets the following requirements:

  • Paid at least 50 percent of the premiums for employee health insurance coverage
  • Had fewer than 25 full-time equivalent employees (FTE) for the tax year
  • Paid average annual wages for the tax year of less than $50,000 per FTE
  • Tax-exempt credit requirement: The organization must be described under Section 501(c)

Examples of qualifying health insurance coverage are as follows: medical care, dental plans, vision plans, nursing home plans, and home health care plans. Examples of coverage not allowed in calculation of the credit are as follows: workers' compensation, automobile medical payment insurance, coverage for on-site medical clinics, and liability insurance.

The credit is claimed as a refundable credit on Form 990-T, Exempt Organization Business Income Tax Return.