Form 8845: Indian Employment Credit

Form 8845, also known as the Indian Employment Credit, is a tax form used by employers in the United States to claim a credit for qualified wages and qualified employee health insurance costs paid to certain employees. This credit is designed to incentivize businesses to hire American Indians who are enrolled members of a federally recognized tribe.

While you cannot claim the credit for tax years 2022 and beyond, understanding the IEC and Form 8845 can be helpful for tax professionals or those who may have claimed the credit in previous years.

Who Qualifies for the Credit?

A. Employers: Any business entity operating in the U.S. can claim the credit, including corporations, partnerships, S corporations, estates, trusts, and cooperatives.

B. Employees: To qualify as a "qualified employee" for the IEC, an individual must be:

  • An enrolled member of a federally recognized Indian tribe.
  • Employed within an Indian reservation or in a location under the governing jurisdiction of an Indian tribe.

What are Qualified Wages and Costs?

A. Wages: Only wages paid to qualified employees during the tax year are eligible. This excludes bonuses, fringe benefits, and any portion of wages exceeding $40,000 per employee (adjusted annually for inflation).

B. Health Insurance: The credit also applies to qualified employee health insurance costs paid by the employer on behalf of the qualified employee and their spouse.

Is the Indian Employment Credit still available?

Yes, the Taxpayer Certainty and Disaster Tax Relief Act of 2020 extended the credit to cover qualified wages and health insurance costs paid in tax years beginning in 2021 and beyond.