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The Farm CPA

RSS By: Paul Neiffer, Top Producer

Paul is now part of the fourth generation in America that is involved in farming and hopes the next generation will be involved also. Through his blog he provides analysis and insight to farmer tax questions.

IRS Adds New Form for Health Insurance Credit

Dec 06, 2010

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.

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