If you purchased health insurance coverage, you’re already enjoying the peace of mind that comes with knowing you’re covered if you or a family member gets sick. This year, you also can enjoy a second benefit: knowing that you will not be required to pay a penalty to the government when you file your taxes.
But what if you only had coverage for part of the year, or received financial assistance from the government to help lower the cost of your monthly payments? Here are eight things you need to know about health insurance and your taxes.
1. What is the individual mandate and how does it affect my taxes?
The individual “mandate” (also known as the individual shared responsibility provision) requires everyone who can afford health insurance to purchase coverage or pay a tax penalty. If you can afford coverage but choose not to purchase it, the penalty will apply unless you qualify for a health coverage exemption. The amount of the penalty for failing to have coverage varies.
2. What if I only had coverage for part of the year in 2014?
According to the Centers for Medicare & Medicaid Services, you are not required to pay a penalty if you had healthcare coverage for more than nine months in 2014 or are eligible for an exemption. If you previously received an exemption or want to apply for one when filing your taxes, you will need to complete Form 8965.
3. How do I know if I qualify for a health coverage exemption?
Most people who can afford health insurance but choose not to purchase coverage will be required to pay the penalty. However, there are a variety of reasons someone might be eligible for an exemption, including hardship, living abroad or having an income below the level that requires you to file a tax return. You can find more information about exemptions here.
4. Can I sign up for insurance now to avoid paying the penalty?
The deadline for 2014 already has passed, so if you did not sign up for coverage a penalty may apply. However, there will be a special enrollment period for 2015 coverage for people who were unaware or didn’t understand the impact of the new requirement to enroll. You’ll be able to sign up for coverage from March 15 to April 30, 2015, to help you avoid a penalty on your 2015 taxes.
5. What if I got coverage through my employer?
The IRS says most people who have health insurance coverage through their jobs throughout the year will simply have to check a box to indicate you have coverage. You will not be required to fill out any new forms.
6. Do I need proof of my health insurance when filing my taxes?
You should have received a statement in the mail from the marketplace in February, called a Form 1095-A. If you have an online account, the forms will be posted there as well. A small percentage of people received incorrect forms from the government. If your form was affected, you will receive a phone call from the marketplace in March, in addition to letters and emails with additional information about the status of your form. You can find more information here.
7. I received financial assistance through the marketplace. Is that considered income on my tax return?
According to the IRS, the financial assistance you received from the federal government is not counted as income. It is a premium tax credit available through the healthcare marketplace which helps lower your monthly payments.
8. I’m still confused about how the Affordable Care Act affects my taxes. Where can I get help?
If you purchased health insurance through the federal marketplace, you may be eligible to receive free assistance, like tax software programs or in-person guidance, from the government when completing your taxes. For more information, visit IRS.gov/freefile. To learn more about how the health reform law could impact your taxes, visit Healthcare.gov/taxes or call the customer service center at 1-888-889-4325.