What Does the Affordable Care Act (or Obamacare) Mean for Me and My Taxes?
Note: The following information concerns your 2014 Tax Return (filed in 2015) and actions that should be taken in 2014. We will update this page when the IRS releases more information on how to report your health insurance situation on your return.
Due to the Affordable Care Act (Obamacare), almost all U.S. citizens and legal residents (and their dependents) will be required to have health insurance for the entire year (starting on January 1, 2014). There is a tax fee for not having health insurance during 2014 and beyond. There are very few exceptions to this requirement. The details of the Affordable Care Act can be confusing so check out any of the topics below and we can help make it more understandable for you:
Who is Required to Have Health Insurance?
You must have have qualifying health insurance, qualify for an exemption, or make a payment for not having insurance when you file your tax return if you are one of the following:
What If I Already Have Health Insurance?
If you already have health insurance through your employer, a private company, or under a government program (Medicare, Medicaid, or veteran coverage) for the entire year, you only have to check a box on your tax return (1040-EZ, 1040-A, or 1040) showing that you had health insurance for the year. There is no need to change anything.
However, if you have private health insurance (not through an employer), you may wish to check out the Health Insurance Marketplace anyway, in case you can find a better deal. You can get started at HealthCare.gov.
If you already have coverage and you wish to remain with your current plan, make sure you will still be covered starting on January 1, 2014 and beyond. If you are already enrolled in a 2014 Marketplace plan, your benefit year ends on December 31, 2014. To continue health coverage in 2015, you can renew your current health plan or choose a new health plan through the Marketplace during the 2015 Open Enrollment period.
If you have had a change in income or family circumstance in 2014, you should be sure to update your information at the Marketplace by September 30, 2014. There will be instructions for updating your information on HealthCare.gov.
You need to make sure that you have the minimum essential coverage as defined by the Affordable Care Act. The minimum essential coverage includes individual policies purchased on the Health Insurance Marketplace, job-based coverage, Medicare, Medicaid, CHIP, TRICARE and others. See more about this on HealthCare.gov.
Review Enrollment and other important Affordable Care Act dates.
If you don't have health insurance now and don't expect to have it in the future, please see below.
How Will I Report My Health Insurance Coverage on My Tax Return?
The following forms will be used to report health insurance coverage beginning with your 2014 tax return:
- Form 1095-A - Health Insurance Marketplace Statement - You will receive this form if you purchased health insurance via the Health Insurance Marketplace exchange in 2014. It will provide information for you if you need to complete Form 8962 for the Premium Tax Credit. If you or your family members enrolled in more than one health plan via the Marketplace, you will receive a Form 1095-A for each policy. A copy of each Form 1095-A will also be sent to the IRS.
- Form 1095-B - Health Coverage - This form is provided by your insurance provider and will have the information needed to report on your tax return that you, your spouse, and any dependents, had qualifying health insurance coverage for some of the year or for the whole year.
- Form 1095-C - Employer-Provided Health Insurance Offer and Coverage - This form will be provided to you by your employer and contains information about the health coverage offered to you by your employer. There was a delay in the large employer mandate to provide health insurance coverage so if you do not receive this form from your employer, check with your employer's benefits department.
- Form 8962 - Premium Tax Credit - This form will be prepared for you when you prepare your return on efile.com if you purchased health insurance through the Marketplace and you are eligible for the Premium Tax Credit.
- Form 8965 - This form will need to be prepared by you if you are claiming that you are exempt from health care coverage. See below under Tax Payment Exemptions.
I Still Have Not Received my Form 1098-A? What Can I Do?
You should contact the Marketplace from which you received health insurance and request a copy of your Form 1098-A. You are not required to send that form to the IRS when you file your tax return.
What If I Don't (or Won't) Have Health Insurance?
If you can afford health insurance but choose not to buy it in any month in 2014, generally you will need to pay a fee that is known as the individual shared responsibility payment when you file your 2014 Tax Return on efile.com. You might be able to obtain an exemption from the payment, but that is only for certain circumstances. The payment may cause your tax refund to be lower, or might result in higher taxes due on your tax return.
Open Enrollment for 2014 has ended. Generally you cannot enroll in a private health plan for the rest of 2014. However there are exceptions to this if you have had a qualifying life event like marriage, birth of a child, or losing another health coverage. If this applies to you, you might be eligible for the special enrollment period that lets you buy coverage via the Marketplace on HealthCare.gov outside the Open Enrollment period.
The Open Enrollment period for 2015 coverage is November 15, 2014 to February 15, 2015. Take advantage of this open enrollment period if you still need health coverage. After February 15, 2015, you won't be able to buy health coverage at the Marketplace for 2015 until the next Open Enrollment period the following year (unless you qualify to apply under a special enrollment provision)
Your employer may be required to offer you health insurance, so you should check with them as well. If your employer employs 50 or more people, they are probably required to offer you health coverage. If they offer insurance to any employee, even if they have less than 50, then they must offer it to all employees.
If you can get coverage through your employer, you can still opt to get your insurance privately or through the Marketplace at HealthCare.gov (during the Open Enrollment period), but you will not qualify for a health insurance premium called a subsidy.
If you don't think you can afford to pay for health insurance, please read on.
What If I Can't Afford Health Insurance?
If your household income is between 100% and 400% of the federal poverty guidelines, and you do not qualify for Medicare, Medicaid, or employer-sponsored health coverage, then you may qualify for a subsidy to pay some or all of the cost of health insurance purchased through an exchange.
A health insurance premium subsidy is actually a federal tax credit, which the IRS calls the Premium Tax Credit. However, the credit is applied directly to the price of your premium and acts like a discount. The amount of your subsidy depends on your family size and income. The lower your income (and the larger your family), the higher your subsidy.
For individuals and families with incomes from 100% to 400% of the federal poverty level, the out-of-pocket cost for health coverage will be from around 2% to 9.5% of the actual price (based on a plan that covers 70% of healthcare costs). Additional funds, called cost-sharing assistance, will be made available to households with incomes lower than 250% of the poverty level.
If you still cannot afford health insurance, or you choose not to purchase it, you must pay a tax payment (see below).
Households with incomes less than 100% of the federal poverty level will generally qualify for Medicaid. More people, including single individuals, may qualify for Medicare, if their resident states are participating in the Medicaid expansion offered by the Affordable Care Act.
What Is the Federal Poverty Level?
The federal poverty guidelines are established each year by the U.S. Department of Health and Human Services. For 2014, the official poverty level for residents of most states ranged from $11,670 for an individual to $40,090 for a family of 8.
What Is the Tax Payment for Not Having Health Insurance?
If you are not covered by health insurance during 2014, you will owe a tax fee that is known as the individual shared responsibility payment payable at the time you file your 2014 Tax Return on efile.com. According to current law, the payment will be phased in over 3 years.
For 2014, the payment will be either the Flat Fee OR the Percentage of Household Income, whichever method is higher -
1. The Flat Fee for 2014 is $95.00 per adult and $47.50 per child, but not over the maximum of $285 per family.
2. The Percentage of Household Income for 2014 is 1% of your taxable income over the minimum filing amount for your filing status, but not over the average cost for the bronze level health plan available through the Marketplace in 2014. Here are the 2014 average costs for bronze level coverage:
- $204 per month for an individual (or $2448 annual)
- $1020 per month for a family with 5 or more members (or $12,240 annual)
The following is what a Single unmarried person with no dependents, who had no health insurance for 2014, with a total income of $40,000 would pay:
1. Using the Flat Fee method - The flat fee for this person would be $95.00
2. Using the Percentage of Household Income method - The total income for this person is $40,000. The 2014 minimum filing requirement for a Single person is $10,150. This amount is subtracted from the total income resulting in $29,850 and 1% of $29,850 is $298.50.
Result - Since $298.50 is larger than the flat fee of $95.00, this person would have a total payment of $298.50 for 2014 (or $24.87/month for every month that they did not have health insurance in 2014). This person would make their payment when they file their 2014 tax return in April 2015.
The same method will be used for 2015 and 2016 but the dollar amounts will change. For 2015 the flat fee will be $325 per adult and $162.50 per child, with a maximum of $975 per family. The Percentage of Household Income will be 2%.
For 2016 the flat fee will be $695 per adult and $347.50 per child, with a maximum of $2085 per family. The Percentage of Household Income will be 2.5%.
Tax Payment Exemptions
You may be able to qualify for an exemption to the tax payment if any of the following is true for you:
- you are uninsured for less than 3 months of the year
- the lowest priced coverage for you would cost more than 8% of your income
- you don't need to file a tax return because your income is too low
- you are part of a recognized religious group with objections to health insurance
- you are a member of a recognized health care sharing ministry
- you are a Native American eligible for services through an Indian Health Services provider
- you are incarcerated (either detained or jailed)
- you are neither a U.S. citizen, a U.S. national, nor an alien lawfully present in the U.S.
If you are not able to purchase health insurance due to a "hardship", you might qualify for the hardship exemption. To qualify for an exemption, you must be facing any of the various circumstances defined by the Health Insurance Marketplace, such as:
- you filed for bankruptcy in the last six months
- you were homeless
- you received a shut-off notice from a utility company
- you had medical expenses that you could not pay in the last 24 months, which resulted in substantial debt
- you recently experience domestic violence
- your individual insurance plan was cancelled and you believe other Marketplace plans are unaffordable
- you experienced another hardship in obtaining health insurance
- you experienced a fire, flood, or other natural or human-caused disaster that caused substantial damage to your property
For more information about the hardship exemption, see HealthCare.gov/exemptions.
How Do I Apply For a Tax Payment Exemption?
There are two ways you can apply for an exemption:
- Claim it on your 2014 federal tax return (due in April 15, 2015) using Form 8965, Health Care Exemptions, OR
- Apply for it using the right Health Insurance Marketplace form (based on your situation)
What if I Am Eligible for an Exemption From Health Insurance for One Month
You are not responsible for the tax payment for not having insurance for that month. However, you must claim the exemption on your tax return or report the exemption you obtained from the Marketplace by completing Form 8965, Health Coverage Exemptions, and including it with your filed tax return.
|Health Insurance Marketplace Opened
||October 1, 2013
|Recommended Enrollment for 2014 ended
||December 23, 2013
|Obamacare Took Effect
||January 1, 2014
|Open Enrollment for 2014 ended
||March 31, 2014
|Report Income Changes to Marketplace
||September 30, 2014
|Open Enrollment Starts for 2015
||November 15, 2014
|Recommend Enrollment for 2015
||December 15, 2014
|Coverage for 2014 Marketplace ends
||December 31, 2014
|Open Enrollment Ends for 2015
||February 15, 2015
|2014 Tax Return Deadline
April 15, 2015
More Tax Information on Health & Medical Expenses
What is the Premium Tax Credit?
What Medical Expenses Can I Deduct on My Tax Return?
Health Savings Accounts and Taxes