The Affordable Care Act (ACA) and Your Taxes
Estimated read time: five minutes.
Changes as part of the ACA include:
- Lower costs for Marketplace coverage
- New qualifications to help pay for health coverage
- Longer enrollment periods and changes to enrollment period dates
- Health plan and price changes.
Health insurance has seen some changes over the years, including the mandate and changes due to the COVID-19 Pandemic. For current year returns, there is no federal health insurance mandate as this part of the ACA has expired.
Healthcare Coverage and Taxes
If you are not insured through a job or you need to find healthcare coverage, be sure to go to healthcare.gov to get the most up-to-date plans and prices for health insurance coverage. The online application will help you see if you qualify for the Premium Tax Credit (PTC) as this can make your health plans much more affordable.
In general, you do not need to worry about reporting your health insurance on your IRS return unless you or a family member purchased a plan through the Healthcare Marketplace and received a 1095-A. This is to reconcile any advance payments of the Premium Tax Credit that were made to your insurance company to reduce your monthly premium payment. When you file, if you did not claim the PTC, you may be eligible for it as a tax credit. You may also need to report your health insurance if your state income tax return requires it due to a state mandate.
When you start your return on eFile.com, we will help you report the required information regarding your health insurance and the Premium Tax Credit on the correct tax forms. If you need to report health insurance information because of the Premium Tax Credit or if you need general information about obtaining health insurance via the Marketplace, see below.
Reporting Your Health Insurance for the Premium Tax Credit
Even if you did not receive advance PTC payments, you should add your health insurance information so you can see if you qualify for this refundable tax credit. The IRS will reject your return if you had 1095-A healthcare and did not include this on your return. When you prepare your tax return on eFile.com and indicate that you need to report your advance payments to compare with your Premium Tax Credit for the year, we will prepare the proper tax forms to report this on your tax return.
Start Your Tax Return Now
How to Report Your Health Insurance - You will only need information from your Form 1095-A to report your payments for the Premium Tax Credit plus the premiums you paid each month of the year. During the tax interview, you will be asked about your healthcare and you can then report applicable information. Here are the four main health insurance tax forms broken down:
- Form 1095-A - Health Insurance Marketplace Statement - You will receive this form if you purchased health insurance via the Health Insurance Marketplace exchange. It will provide information for you if you need to include eFileIT 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 holder. A copy of each Form 1095-A will also be sent to the IRS. You will not need to include the Form 1095-A with your return when you e-file, but you will use the information from it when you prepare your return on eFile.com and a Form 8962 will be prepared for you. Form 8962 is needed with your return to claim the credit and reconcile your advance credit payments.
- Form 1095-B - Health Coverage - This form is issued by your insurance provider and has the information showing that you, your spouse, and any dependents had qualifying health insurance coverage for some or the entire year. This form is for your information only and is not included in your tax return. You will only need to enter healthcare information if you were insured through the Marketplace and received Form 1095-A.
- 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. This form is for your information only and is not included in your tax return. You will only need to enter healthcare information if you were insured through the Marketplace and received Form 1095-A.
- Form 8962 - Premium Tax Credit - This form will be prepared for you on eFile.com if you purchased health insurance through the Marketplace and you are eligible for the Premium Tax Credit and you wish to claim it.
If you did not receive Form 1095-A, you can go healthcare.gov and download it from there.
If you receive a letter from the IRS about your Marketplace coverage based on their records, they have received a Form 1095-A from the Marketplace for you and the letter might be informing you that you did not file a tax return with this information. The letter is a reminder that if you do not file a return (or if you still need to file the information from your 1095-A), you may not be able to qualify for advance tax payments for your Marketplace coverage next year. Also, if the IRS received a 1095-A form for you and you did not include the information with your return, it might get rejected by the IRS for this reason. If this happens, log back into your account and add the information from your 1095-A and resubmit your return. Any questions? Contact us and we can help you.
For more information about the IRS health insurance letter, visit our Premium Tax Credit page. Be sure you add your 1095-A the first time you file so you can eFileIT to the IRS and not have to worry about any IRS rejections. If you do forget it and are rejected, don't panic! You can re-file at no additional charge with the updated information.
If You Don't Have Health Insurance
You no longer have to report that you had health insurance all year nor pay a fee if you did not have health insurance on your income tax return. Below is information if you still wish to obtain health insurance via the Marketplace. Here are forms and schedules if you still need to file your previous year returns.
If you don't get health insurance from your employer, you can purchase it via the Marketplace during the open enrollment period (generally, November 1 to December 15 of a given year - refer to the table below.
Open enrollment or time to change plans for coverage unless you qualify for the Special Enrollment Period (see below)
November 1 - January 15 of the following year
Coverage begins for your new, updated, or unchanged plan if you enrolled by December 15
January 1 of next year
Coverage begins if you enroll by January 15 of the next year and paid your first premium
February 1 of next year
Tax return deadline - file on time or penalties may accrue if you owe taxes
Report income and household changes to healthcare.gov or your employer-sponsored healthcare
If you miss the open enrollment period, 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. You might get coverage during the special enrollment period if any of these situations apply:
1) Life Changes for Special Enrollment Period:
- Loss of health coverage (job loss, etc.)
- Changes in household size such as getting married, birth or adoption of a child, divorce, legal separation, death
- Moving to a new residence
- Gaining citizenship or lawful presence in the U.S.
- Released from incarceration (detention, jail, prison)
- No longer eligible for Medicaid or CHIP
- Being a member of a federally recognized tribe or as an Alaska Native Claims Settlement Act (ANCSA) Corporation shareholder
- AmeriCorps starting or ending service.
2) Medicaid and CHIP:
- You can enroll in coverage through Medicaid and the Children's Health Insurance Program (CHIP) if you qualify. There is no limited enrollment period for these programs which provide free or low-cost health coverage to millions of Americans and you can apply any time.
If you do not qualify for the two circumstances described above, your employer may be required to offer you health insurance, so you should check with them as well. If your company employs 50 or more people, they are required to offer you health coverage. 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.
3) If You Cannot 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.
Subsidy - 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.
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.
Federal Poverty Level - The federal poverty guidelines are established each year by the U.S. Department of Health and Human Services. Review the poverty income guidelines or rates via the linked page for more details.
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