Jump directly to the content

Are Church-Paid Medical Insurance Benefits Taxable?

The Affordable Care Act changes several rules. Here's what churches must note.

Are Church-Paid Medical Insurance Benefits Taxable?

Update:Two developments restore the ability for churches to make reimbursements and pay premiums. Read about each development in “Churches Can Once Again Reimburse Employee Health Care Costs.”

Prior to the enactment of the Affordable Care Act ("Obamacare") many employers provided health benefits for their employees by paying health insurers directly for the cost of private health insurance, or by reimbursing employees for the substantiated cost of insurance premiums. The amounts paid by employers under such arrangements were nontaxable fringe benefits under section 106 of the tax code, which states that, with some exceptions, "gross income of an employee does not include employer-provided coverage under an accident or health plan."

The IRS affirmed the tax-free status of these arrangements in a 1961 ruling. It concluded that if an employer reimburses an employee's ...

Log In For Full Access

Interested in becoming a member? Learn more.

Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.

Related Topics:
Posted:
  • April 29, 2014

Related ResourcesView All

Smart Money for Church Salaries
Smart Money for Church Salaries
This resource takes you on a journey through real-life case studies to uncover compensation issues and navigate their solutions.
ChurchSalary
ChurchSalary
Let ChurchSalary do the work. Get personalized compensation reports for staff and pastors.
Church Compensation
Church Compensation
Learn the many pieces of employee compensation.
Best Practices for Technology Usage
Best Practices for Technology Usage
Establish policies and best practices to govern the use of technology for church staff.