Tax Exemptions and Payments For No Health Insurance
Affordable Care Act Overview
Since the individual mandate is no longer required and exemptions are not relevant for your 2020 return, the information below is not applicable, however we will keep it for 2018 and prior year returns.
Almost all U.S. citizens and legal residents (including dependents) are required to have health insurance for the entire year because of the Affordable Care Act. If you don't have health insurance during the year, you may have to pay a fee for not having insurance, however, you may qualify for a tax payment exemption.
Tax Payment for Not Having Health Insurance
If you were not covered by health insurance during 2018, you may owe a tax fee that is known as the individual shared responsibility payment payable when you file your 2018 or earlier tax return.
For 2018, the payment will be either the Flat Fee OR the Percentage of Household Income, whichever method is higher:
1. The Flat Fee for 2018 is $695 per adult and $347.50 per child under 18 years, but not over the maximum of $2,085 per family.
2. The Percentage of Household Income for 2018 is 2.5% 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 2018.
Below are the 2018 average costs for Bronze level coverage:
- $575 per month for an individual (or $6,900 annual)
- $1,635 per month for a family with 5 or more members (or $19,616 annual)
The following is what a Single unmarried person with no dependents, who had no health insurance for 2018, with a total income of $40,000 would pay:
1. Using the Flat Fee method - The flat fee for this person would be $695.00
2. Note - Using the Percentage of Household Income method - The total income for this person is $40,000. The 2018 minimum filing requirement for a Single person is $10,400. This amount is subtracted from the total income resulting in $29,600 and 2.5% of $29,600 is $740.
Result - Since $740 is larger than the flat fee of $695.00, this person would have a total payment of $740 for 2018 (or $61.66/month for every month that they did not have health insurance). This person would make their payment when they file their 2018 tax return.
Tax Payment Exemptions
You might qualify for an exemption to the tax payment if any of the following is true for you:
- Uninsured for less than 3 months of the year
- 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
- Part of a recognized religious group with objections to health insurance
- Member of a recognized health care sharing ministry
- Native American eligible for services through an Indian Health Services provider
- Incarcerated (either detained or jailed)
- 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:
- Filed for bankruptcy in the last six months
- 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
- Recently experienced domestic violence
- Individual insurance plan was canceled and you believe other Marketplace plans are unaffordable
- Experienced another hardship in obtaining health insurance
- 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.
There are two ways you can apply for an exemption:
- Claim it on your federal tax return using Form 8965, Health Care Exemptions, OR
- Apply for it using the right Health Insurance Marketplace form (based on your situation)
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 (also known as Exchange) by completing Form 8965, Health Coverage Exemptions, and including it with your filed tax return.
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