Change In Tax Treatment Of Health Care Sharing Ministry Payments
Introduction
What are Health Care Sharing Ministries?
The Previous Tax Treatment
IRS Notice 2018-55
The New Tax Treatment
Impact on Health Care Sharing Ministries
Impact on Members
Response from Health Care Sharing Ministries
What Members Should Do
Conclusion
Introduction
The tax treatment of health care sharing ministry payments has recently undergone a significant change that is causing concern among members of these organizations. The Internal Revenue Service (IRS) recently issued Notice 2018-55, which clarifies the tax treatment of payments made to health care sharing ministries. This notice has significant implications for both the ministries themselves and their members. In this article, we will explore what health care sharing ministries are, the previous tax treatment, the new tax treatment, and the impact on both the ministries and their members.What are Health Care Sharing Ministries?
Health care sharing ministries are organizations that allow members to share medical expenses with one another. Instead of paying premiums to an insurance company, members contribute a certain amount of money each month to the ministry. When a member has a medical need, the ministry then shares the cost of that need among the other members. These organizations are often based on religious or ethical beliefs and are exempt from the Affordable Care Act's individual mandate.The Previous Tax Treatment
Before the recent change in tax treatment, payments made to health care sharing ministries were considered to be deductible under Section 213 of the Internal Revenue Code. This meant that members could deduct the amount of their contributions to the ministry from their taxable income. Additionally, the ministries themselves were exempt from federal income tax.IRS Notice 2018-55
In June 2018, the IRS issued Notice 2018-55, which clarified the tax treatment of health care sharing ministry payments. According to the notice, payments made to these organizations are no longer considered to be deductible under Section 213 of the Internal Revenue Code. This means that members can no longer deduct their contributions to the ministry from their taxable income. Additionally, the notice clarified that health care sharing ministries are not insurance companies and therefore are not exempt from federal income tax.The New Tax Treatment
Under the new tax treatment, payments made to health care sharing ministries are considered to be personal expenses and are not deductible. This means that members will have to pay taxes on the full amount of their income, without being able to deduct their contributions to the ministry. Additionally, health care sharing ministries will now have to pay federal income tax on their earnings.Impact on Health Care Sharing Ministries
The impact on health care sharing ministries is significant. Because these organizations are no longer exempt from federal income tax, they will now have to pay taxes on their earnings. This could lead to higher costs for members, as the ministries may pass on these additional costs to them. Additionally, the loss of the tax deduction for members may make it less appealing for people to join these organizations.Impact on Members
The impact on members is also significant. Without the ability to deduct their contributions to the ministry from their taxable income, members will now have to pay taxes on the full amount of their income. This could lead to higher tax bills for some members, which could make it more difficult for them to afford health care sharing ministry payments. Additionally, the loss of the tax deduction may make it less appealing for some people to join these organizations.Response from Health Care Sharing Ministries
Several health care sharing ministries have responded to the IRS notice by stating that they will continue to operate as usual. Some have stated that they will absorb the additional costs associated with the loss of the tax exemption and not pass them on to members. Others have stated that they will work to find ways to reduce costs for members in order to make up for the loss of the tax deduction.What Members Should Do
Members of health care sharing ministries should consult with a tax professional to determine how the new tax treatment will affect them. They should also review their budgets to make sure that they can still afford to make payments to the ministry. Additionally, members may want to consider other health care options, such as traditional insurance plans, in order to compare costs and benefits.Conclusion
The recent change in tax treatment of health care sharing ministry payments has significant implications for both the ministries and their members. While some organizations have stated that they will absorb the additional costs associated with the loss of the tax exemption, it remains to be seen how this change will ultimately impact these organizations and their members. Members should consult with a tax professional and review their budgets to determine how the new tax treatment will affect them.People Also Ask About Change In Tax Treatment Of Health Care Sharing Ministry Payments
What is the change in tax treatment of health care sharing ministry payments?
The change in tax treatment of health care sharing ministry payments relates to the repeal of the individual mandate penalty under the Affordable Care Act. Prior to the repeal, individuals who did not have minimum essential coverage were subject to a tax penalty. However, individuals who were members of a health care sharing ministry were exempt from the penalty. With the repeal of the penalty, members of health care sharing ministries are no longer exempt and may owe taxes on their payments.
Are health care sharing ministry payments still considered tax-deductible?
Yes, health care sharing ministry payments are still considered tax-deductible as long as the ministry meets certain criteria. The ministry must be a qualified 501(c)(3) organization and the payments must be used for medical expenses. However, it is important to note that members may no longer be exempt from paying taxes on their payments.
Will health care sharing ministry payments be treated the same as insurance premiums for tax purposes?
No, health care sharing ministry payments will not be treated the same as insurance premiums for tax purposes. Insurance premiums are considered a qualified medical expense and may be deducted on your tax return, but health care sharing ministry payments are not treated the same way. Members may still be able to deduct their payments as a charitable contribution if the ministry meets certain criteria.
