ACA Tax Credits for Nonprofits

Nonprofits are eligible for tax credits that put cash into their coffers. A free study is available for your organization.

By Thomas Prevatt, senior manager

As a part of the Patient Protection and Affordable Health Care Act (ACA), Congress is offering a tax credit designed to encourage small employers to provide health care coverage to their employees. The good news for nonprofits is that the tax credit can be claimed by tax exempt organizations who meet certain criteria as well.

Your organization can claim the tax credit whether it has paid-in taxes or not. Additionally, your organization only has to have paid premiums for employees and meet a few other conditions to qualify. The credit can be worth up to 25 percent of your organization’s health care premium costs through tax year 2013. Furthermore, the IRS has announced an enhanced version of the tax credit effective Jan. 1, 2014, which increases the rate from 25 percent to 35 percent.

A quick and simple example of how this could benefit your organization is as follows: Say your tax exempt organization paid $20,000 a year for employees’ health care premiums. If you qualify for the max credit of 25 percent you can request a credit of $5,000 for each year through 2013 and possibly an additional $7,000 in tax year 2014 thanks to the enhanced version of the credit. In this example, the credit would translate to a total saving of $17,000 if claimed for tax years 2012, 2013 and 2014. Those are significant dollars for most nonprofits.

Organizations who are not taking advantage of this credit are leaving money in the IRS’ pocket. If you’re interested in how your nonprofit may be able to benefit from this tax credit, contact Thomas Prevatt at thomas.prevatt@aprio.com. We’ll be happy to provide a free study to determine if your organization qualifies.