IRS Adds New Form For Health Insurance Credit
The IRS has released final guidance for claiming the new health insurance premium credit on your tax return for 2010, along with new Form 8941 (Credit for Small Employer Health Insurance Premiums) and related instructions. Remember that if you employ 10 or less farm employees and their average pay is less than $25,000, you can get a credit for up to 35% of the health insurance premiums that you paid during 2010.
You will file Form 8941 to make this claim and it can reduce your income tax dollar for dollar. However, the trade-off is that you must reduce your farm expenses by the amount of the credit which may increase your self-employment taxes. If your taxable farm income is over the social security wage base of $106,800, you will almost always take the credit. If your taxable farm income is less than $50,000 with no other income, then you may not want to take the credit due to the increase in self-employment taxes.
In all cases, you will need to run your income tax projections with and without the credit to see which case results in the lowest overall tax.
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
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