The Affordable Care Act (ACA) and your taxes
We are doing our best to keep up with changes to the ACA. We will post updates as more is revealed by Congress.
Effective 2014, the Patient Protection and Affordable Care Act (also known as "Obamacare" or the Affordable Care Act for short) requires all taxpayers to maintain qualifying health coverage or “minimum essential coverage” from government-sponsored programs, eligible employer-sponsored plans, individual market plans, and miscellaneous coverage designated by the Department of Health and Human Services. Failing to do so will result in a penalty that will be assessed on your federal income tax return, unless you can prove that you qualify for an exemption.
In order for the IRS to make this determination, certain health insurance information needs to be reported on your federal tax return. Health insurance providers should provide the information regarding coverage during the tax year for the taxpayer, taxpayer’s spouse and individuals the taxpayer claims as dependents. You will receive onen of the following three forms from your insurance provider:
Form 1095-A reports information associated with the Health Insurance Marketplace (subsidized insurance through a state Exchange). This will also have the necessary information for the purposes of filling out Form 8962 (Premium Tax Credit) to determine if the taxpayer underpaid or overpaid for premiums during the year. A taxpayer must complete Form 8962 and file it with their federal tax return if they want to claim the premium tax credit or if they received premium assistance through advance credit payments.
Form 1095-B reports information associated with non-Marketplace health coverage. This includes employer-sponsored plans, government-sponsored programs, individual market insurance, etc. NOTE: Only one Form 1095-B will be provided for each policy which will include all individuals listed on that policy. The recipient of Form 1095-B should provide copies to all individuals who might need it.
Form 1095-C reports information associated with information about the health coverage offered to you by your employer. This information is needed to determine if a taxpayer is eligible for the Premium Tax Credit if the taxpayer decides to purchase health insurance coverage through the Marketplace instead.
NOTE: For 2014 and 2015, ONLY Form 1095-A is required to be issued by the health insurance provider and reported in the taxpayer’s tax return. Forms 1095-B and 1095-C are not required to be issued or report on tax returns until 2016 (for the 2015 tax year).
Individuals who do not have minimum essential coverage and do not qualify for an exemption may be liable for the individual shared responsibility payment. There will be no fee if the taxpayer meets certain exemptions, a few of which are, not having coverage for less than 3 months of the year, lowest cost plan was more than 8% of the taxpayer’s household income, and a variety of other hardship exemptions.
Some exemptions will be claimed via Form 8965 with the tax return, while other exemptions will need to be applied for and granted by the Marketplace. If you plan to apply for an exemption you should also plan to file an extension as they take time to process.
"Opting Out Of The Obamacare Tax: What Happens If You Don't Pay?" - an easy to read blog by Kelly Phillips Erb (we like her whole taxgirl blog series on Forbes.com)
Find more information about the tax-related provisions of the health care law at IRS.gov/aca
Find more information about the health care options at HealthCare.gov
Residents of Washington State: