Beginning January 1, 2014, every individual in the United States was required to have “minimum essential health coverage” under the ACA, pay a penalty (called the “shared responsibility payment”) or qualify for an exemption.  The term “Individual” includes both taxpayers who are required to file returns because of their income, and others including seniors and children who do not have an individual return filing requirement.  An individual who files a return is responsible for the coverage, exemption reporting, or penalty payment for all individuals in the “tax household”.  Your tax household includes you, your spouse (if filing jointly), any individual claimed as a dependent, and any individual you could claim as a dependent (even if you do not).  If you are not required to file a return, your household is exempt from the shared responsibility payment and there is no need to file a return to claim the exemption.  If you are required to file a return, there are many exemptions for situations such as insufficient income, short coverage gaps, and various other hardships.

Minimum essential coverage can be obtained through a qualifying employer group health plan, or as individual coverage either directly through an insurer or through state or federal health coverage exchanges (also called marketplaces).  Coverage under Medicare, Medicaid, and some other government-sponsored programs generally also qualify as minimum essential coverage.  Open enrollment through the exchanges began on November 15, 2014 and will continue until February 15, 2015. In this window, individuals may either enroll or change their personal healthcare plans. In general, if you had insurance all year and did not have any major life changes such as getting married, divorced, or having a dependent join or leave the family, the ACA rules are relatively straightforward and you will not be subject to a shared responsibility payment.

If you did not have coverage in 2014 and did not qualify for an exemption, you will be subject to a shared responsibility payment of the greater of $95 per adult (up to $285), or 1% of household income in excess of the minimum income required for filing a 1040 tax return (the penalty for uninsured persons under 18 is half the adult rate).  In 2015, the penalty will increase to the greater of $325 per adult up to $975, or 2% of excess household income. In 2016 and beyond, the amount will be the greater of $695 per adult up to $2,085 or 2.5% of excess household income. In other words, going without minimum coverage or an exemption will become expensive.

If you obtain health insurance through an exchange, you may also be eligible for a subsidy called the Premium Assistance Tax Credit. In order to qualify for this 2014 tax credit, you must meet the following conditions:

• Your household income must be between 100% and 400% of the federal poverty line (individuals below this level are generally eligible for Medicaid),
• You must be enrolled in a health plan certified as eligible to be offered by an exchange,
• You cannot be claimed as a dependent on anyone else’s return, and
• If you are married at year-end, you must file a joint return

At HBL CPAs, we are prepared to answer your questions about ACA and relevant tax-related ramifications.  If you have questions about whether you qualify for a subsidy or are subject to a penalty, or you are an employer interested in learning more about your options in complying with ACA responsibilities, please contact us and we will be happy to help.  You can also check the website www.healthcare.gov for more information.

 

 

As a general disclaimer, the information provided above is very general and broad in nature, is not represented as complete, and may not apply to taxpayers’ individual situations. We advise all taxpayers to consult a professional tax advisor regarding their own specific tax needs. 

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