Q: Our church would like to apply for the health insurance tax credit that's available to small employers and tax-exempt organizations. Can we include our pastor in the calculation for this credit?
A: The Affordable Care Act ("Obamacare") provides a credit for small employers (including churches) who offer health insurance coverage for the first time or maintain coverage they already have. Note the following two points regarding the treatment of ministers for purposes of the health insurance tax credit:
- If a minister is an employee under the so-called "common law employee test," he or she is taken into account in determining an employer's FTEs for purposes of the health care tax credit. Also, premiums paid by the church for the health insurance coverage of a minister who is an employee can be taken into account in computing the credit, subject to limitations on the credit. If the minister is self-employed for income tax reporting purposes he or she is not taken into account in determining an employer's FTEs or premiums paid.