Under the ACA, individuals who did not have health insurance for more than three months in 2014 must pay a tax penalty. However, according to Congressional Budget Office, an estimated 20 million Americans may qualify to waive that penalty this year. To find out if you qualify for an exemption, review the material below.
How do I know if I qualify for an exemption?
The Affordable Care Act recognizes there are legitimate reasons people may be exempt from paying a tax penalty for not having health insurance.
Some of the common exemption reasons include:
• Can’t afford health insurance; the lowest-priced coverage available would cost more than 8 percent of their household income
• Had medical expenses you couldn’t pay in the last 24 months that resulted in substantial debt
• Had an individual insurance plan cancelled, and believe other marketplace plans are unaffordable
• Received a shut off notice from a utility company
For the full list of exemptions, please check the Healthcare.gov website.
If you’ve been uninsured for fewer than three consecutive months of the year, you don’t need to apply for an exemption. This will be handled when we file your 2014 taxes. Also, if you are not required to file a tax return because your income is too low, you don’t need to apply for an exemption.
If you believe you qualify for one of the exemptions, please notify us as soon as possible, so we will be able to let you know whether you can claim it on your tax return or apply through the Health Insurance Marketplace along with the required documentation in certain cases. Different exemptions require different forms, so be sure to apply with the correct document. You can find and print all of the forms at www.
For those exemptions that should be filed through the Health Insurance Marketplace, the approval process can take a couple of weeks, so don’t wait until we file your taxes to apply for an exemption. Instead, submit your application as soon as possible. That way, it will be documented and processed in time, and we can file your tax return as soon as the IRS begins accepting returns in January.
What I need from you
• All of the usual documentation you provide
• If you are getting an exemption through the Health Insurance Marketplace (also called an exchange) and not claiming the exemption directly on the tax return, you will also need to provide the exemption certificate number.
What if I’m not exempt?
If you don’t have health insurance and don’t qualify for an exemption, you will have to pay a penalty when you file for your 2014 tax return. If that’s the case, don’t worry: We will help you calculate the exact amount of your tax penalty and work to identify any qualifying deductions that may help offset this fee.
The tax penalty, also referred to as the “individual shared responsibility payment,” is based on your family size and income. The penalty will be prorated based on the number of months you are uninsured and will increase each year.
For tax year 2014, the annual one-time tax penalty will be $95 per adult, or one percent of your total income, whichever is greater. For uninsured children in your family, the penalty is $47.50 per child, with a family maximum of $285 for the year. The tax penalty is assessed on your 2014 tax return.
Each year following 2014, the penalty increases – in 2015 the penalty is $325 per person, $162.50 per child – or two percent of your income. By 2016, the penalty rises to $695 per adult, $347.50 per child – or 2.5 percent of your household income.