The Affordable Care Act (ACA) comes with benefits and obligations. The benefit is that every American citizen has affordable access to healthcare. The obligation is to have sufficient health insurance to meet the Minimum Essential Care (MEC) limit.
There is a financial penalty for not having valid health insurance coverage which in some cases may be more than the cost of the coverage itself. You would still be personally liable for any medical costs.
There are, however, subsidies and credits to make coverage affordable for low income groups and to sufferers of certain long-term illnesses.
TAXES
Premiums may attract a tax credit, which can be applied to your monthly (annual) payments or at the end of the year. Keep a record of your medical expenses throughout the year and check whether you qualify for any deductions. Check the IRS Publication 502 to learn more.
Tax credits are based on your current year income. Any underpayment will have to be made up when you file your taxes.
Tax penalties for not having health insurance coverage (or valid exemption) range from a minimum of $695 per adult ($347’50 per child) to 2.5% of your taxable household income, whichever is the greater.
SUBSIDIES
You may be entitled to subsidies that reduce the cost of your health insurance premiums if your estimated income is between 100% and 400% of the federal poverty level. This means about $47,000 per year for a single person or $94,000 per year for a family of four in the US.
Estimate your subsidy eligibility by using TrueCoverage’s subsidy calculator. Know your eligibility and subsidy amount in minutes.
Affordable Care Act & Taxes – At a Glance
This chart explains how the Health Care Law affects you. Use the Health Care Law and Your Tax Return chart to see how the law will affect your tax return.
| IF YOU… | THEN YOU… |
| Are a U.S. citizen or a non-U.S. citizen living in the United States | Must have qualifying health care coverage, qualify for a health coverage exemption, or make a payment when you file your income tax return |
| Had coverage or an employer offered coverage to you in the previous year | Will receive one or more of the following forms; Form 1095-A, Health Insurance Marketplace StatementForm 1095-B, Health CoverageForm 1095-C, Employer-Provided Health Insurance Offer and Coverage This information will help you complete your tax return |
| Had health coverage through an employer or under a government program – such as Medicare, Medicaid and coverage for veterans – for the entire year | Just have to check the full-year coverage box on your Form 1040 series return and do not have to read any further |
| Did not have coverage for any month of the year | Should check the instructions to Form 8965, Health Coverage Exemptions, to see if you are eligible for an exemption |
| Were eligible for an exemption from coverage for a month | Must claim the exemption or report an exemption already obtained from the Marketplace by completing Form 8965, Health Coverage Exemptions, and submitting it with your tax return |
| Did not have coverage and were not eligible for an exemption from coverage for any month of the year | Are responsible for making an individual shared responsibility payment when you file your return |
| Are responsible for making an individual shared responsibility payment | Will report it on your tax return and make the payment with your income taxes |
| Need qualifying health care coverage for the current year | Can visit HealthCare.gov to find out about the dates of open and special enrolment periods for purchasing qualified health coverage |
| Enrol in health insurance through the Marketplace for yourself or someone else on your tax return | Might be eligible for the premium tax credit |
| Received the benefit of more advance payments of the premium tax credit than the amount of credit for which you qualify on your tax return | Will repay the amount in excess of the credit you are allowed subject to a repayment cap |
| Did not enrol in health insurance from the Marketplace for yourself or anyone else on your tax return | Cannot claim the premium tax credit |
| Are eligible for the premium tax credit | Can choose when you enrol in coverage to get premium assistance sent to your insurer each month to lower your monthly payments or get all the benefit of the credit when you claim it on your tax return |
| Are claiming the premium tax credit and did not benefit from advance payments of the premium tax credit | Must file a tax return and IRS Form 8962, Premium Tax Credit (PTC) and claim the credit on the line labelled – Net premium tax credit |
| Choose to get premium assistance when you enrol in Marketplace coverage | Will have payments sent on your behalf – to your insurance provider. These payments are called advance payments of the premium tax credit |
| Get the benefit of advance payments of the premium tax credit and experience a significant life change, such as a change in income or marital status | Should report these changes in circumstances to your Marketplace when they happen |
| Get the benefit of advance payments of the premium tax credit | Will report the payments on your tax return and reconcile the amount of the payments with the amount of credit for which you are eligible |
| Are U.S. citizens or are non-U.S. citizens living in the United States | Must have qualifying health care coverage, qualify for a health coverage exemption, or make a payment when you file your tax return |
| Have health coverage through an employer or under a government program such as Medicare, Medicaid and coverage for veterans for the entire year | Just have to check a box on your Form 1040 series return and do not have to read any further |
| Do not have coverage for any month of the year | Should check the instructions to Form 8965 to see if you are eligible for an exemption |
| Are eligible for an exemption from coverage for a month | Are not responsible for making an Individual Shared Responsibility payment for that month and must claim the exemption or report an exemption already obtained from the Marketplace by completing Form 8965, Health Coverage Exemptions, and submitting it with your tax return |
| Do not have coverage and are not eligible for an exemption from coverage for any month of the year | Are responsible for making an individual shared responsibility payment when you file your return |
| Are responsible for making an individual shared responsibility payment | Will report it on your tax return and make the payment with your taxes |
| Received the benefit of more advance payments of the premium tax credit than the amount of credit for which you qualify | Will repay the amount in excess of the credit you are allowed subject to a repayment cap |
| Need Need qualifying health care coverage for the the current year | Visit Healthcare.gov to find out about the dates of open and special enrolment periods for purchasing qualified health coverage. |
| Enrol in health insurance through the Marketplace for yourself or someone else on your tax return | Might be eligible for the premium tax credit |
| Did not enrol in health insurance from the Marketplace for yourself or anyone else on your tax return | Cannot claim the premium tax credit |
| Or another person on your tax return who is enrolled in coverage through the Marketplace is not eligible for health care coverage through your employer or under a government program | Might be eligible for the premium tax credit |
| Are eligible for the premium tax credit | Can choose to get premium assistance now to lower your monthly payments or get all the benefit of the credit when you claim it on your tax return |
| Choose to get premium assistance now | Will have payments sent on your behalf to your insurance provider. These payments are called advance payments of the premium tax credit |
| Get the benefit of advance payments of the premium tax credit and experience a significant life change, such as a change in income or marital status | Report these changes in circumstances to the Marketplace when they happen |
| Get the benefit of advance payments of the premium tax credit | Will report the payments on your tax return and reconcile the amount of the payments with the amount of credit for which you are eligible |
