Health Care Insurance Tax Refund – What it Means to Your Church

The health care debate rages on and the controversial decisions made by the Supreme Court in recent days has many upset, many relieved and many more confused about how this will impact their organizations.  Because churches are tax exempt they may feel like this doesn’t apply to them but the law does have provisions for churches, and small churches in particular, will reap a significant benefit from this new law and good church management requires looking for ways to save on healthcare dollars.

Health Care Insurance Tax Refund

Churches will quality for a health tax credit for insurance premiums paid for employee health care if they meet the following criteria:

1.  They must have fewer than 25 full time equivilent (FTE) employees for the tax year.  If you are not familiar with the term full time equivilent, an FTE = 40 hours worked so 1 full time employee equals 1 FTE but two employees who work 20 hours each also equals 1 FTE.

2.  The average annual employee wages for the year (excluding ministers) has to be less than $50,000 per employee.  So to calculate this you count up all of your employees including the ministers and then add up all of the wages without including the minister wages and divide by the number of employees.


  • 2 ministers + 6 employees = 8 FTE
  • Wages for 6 employees = $150,000/8 = $18,750 average wages

3.  The church pays premiums for health insurance coverage under a qualifying arrangement.  A qualifying arrangement is when the church pays at least 50% of the cost of health insurance premiums for employees and those premiums are paid to an insurance company or other eligible provider.

Richard Hammer from Church Law and Tax does a much better job explaining this in the following video.

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