Six Things Taxpayers Need To Know
Key facts for your individual clients.
The Affordable Care Act is hundreds of pages long, and impacts virtually every taxpayer and employer. When it takes effect on January 1, 2014, it is important that tax professionals understand the basics at the very least. While every page is important, we've broken down the most critical information for tax professionals into six must-know facts.
Health Care Reform Provides Affordable Insurance to the Uninsured
- Beginning October 1, 2013, uninsured Americans can start shopping for affordable health insurance in the online health insurance marketplace.
- Most uninsured U.S. citizens and legal residents will be required to purchase health insurance by March 31, 2014.
Health Care Reform Provides Expanded Coverage
- Ability for young adults to stay on parents' plan until age 26.
- Individuals with pre-existing conditions cannot be denied coverage.
- Medicaid will now be offered to individuals under age 65 with income less than about $15,302 ($31,155 for a family of four).
You May Be Eligible for a Government Subsidy
- Uninsured individuals who purchase health insurance through an online health insurance marketplace or exchange and have income no greater than about $94,200 for a family of four, may be eligible for a government subsidy to help pay for health insurance.
- The subsidy will be in the form of a tax credit.
- Unlike most tax credits, you will not have to wait to receive the credit or subsidy; it will be applied to your insurance premium when you purchase in 2014.
You Can Start Checking Insurance Options Before 2014
- Beginning in October 2013, if you're uninsured or looking for more affordable insurance, you can visit your state's online health insurance marketplace to see your options.
You May Receive a Penalty if Not Insured by March 31, 2014
- If you are required to purchase health insurance and have not done so by March 31, 2014, you will receive a penalty.
- The tax penalty will be on your 2014 tax return filed in 2015.
- The penalty in 2014 is $95 per adult, $47.50 per child, capped at $285 or 1 percent of household income depending on income, whichever is greater.
- Each year the penalty increases.
- By 2016, it rises to $695 per adult, $347.50 per child, capped at $2085 or 2.5 percent of household income, whichever is greater.
- There is no penalty for a gap in coverage less than three months
You May Be Exempt from the Health Care Reform Law
You may not be required to purchase insurance and will not see any changes in 2015 on your 2014 tax return with regard to the purchase of insurance if:
- You already have health insurance through your employer, Medicare, Medicaid, or purchased on your own
- You have income below the IRS tax-filing threshold ($9,750 if you are single)
- You have financial hardship
- The lowest cost plan option exceeds 8% of your income
- You are American Indian
- Click to reach a full list of exemptions