Health Care Law and Your Taxes

health care exemptions for your taxesThe tax filing season is coming up quickly! It isn’t too early to start thinking about the health care law and how it affects your taxes. You may qualify for an exemption. The Affordable Care Act has put certain requirements in place that you must follow including:

Having health care coverage – This is also called minimum essential coverage. Examples of plans that may qualify include Marketplace plans, job-based plans, Medicare, Medicaid, and CHIP.

Qualifying for a health coverage exemption – These are usually due to hardship. If you qualify for a hardship, you are not required to have health care coverage and you are exempt from penalties for not having insurance. You must apply to qualify for a hardship, and can download the forms at the Marketplace.

Make a shared responsibility payment – These payments are made with your federal income tax return for the months that you didn’t have insurance OR an exemption.

Health Care Coverage Exemptions

As already mentioned, if you meet certain qualifications for the tax year, you may not have to have minimum coverage and still avoid the tax penalty. You won’t have to make the shared responsibility payment, either. Instead, you’ll file Form 8965 when you file your return. This does not necessarily exempt you from having to carry insurance for the whole year. Instead, it goes on a month by month basis. For any months that you don’t qualify for a coverage exemption, you have to have insurance OR make a shared responsibility payment. You may be exempt if you meet one of the following:

  • The lowest cost coverage offered is not affordable.
  • You have a gap in coverage that is less than three months in a row.
  • You qualify for an exemption for one of a few other reasons. This can be having a hardship that prevents you from getting coverage. It may also be because you belong to a group that is specifically exempt from the coverage requirement.

Important Takeawawys

The Federally-sponsored Marketplace used to grant exemptions for certain people or groups. This included people who are incarcerated and Indian Tribes. These exemptions are still in place for eligible taxpayers. However, these exemptions must be filed on the tax return. For a full list of exemptions and how to claim them, click here. You may also find out if you’re eligible for a coverage exemption by using the IRS interactive tool.

NOTE: Federal tax returns MUST show one of these three options: reporting health care coverage, claiming an exemption, or reporting a shared responsibility payment. Electronically filed returns that do NOT reflect one of those three options will be rejected. If you file a paper return and do not indicate one of the three options, your return will take longer to process and any refunds may be delayed.

The Affordable Care Act has had mixed reviews over the past several years. In the past year, many people have said that health insurance is NOT affordable. But that’s a topic for a another day. Whatever your thoughts on the current state of health care, there is one thing WE know for sure–it can have a definite impact on your tax bill.

Tagged with: , , , , , , , , , , , ,

Leave Feedback

This site uses Akismet to reduce spam. Learn how your comment data is processed.