For many Americans, the “fun” part about filing their taxes is dealing with the way the tax laws change from year to year.
For 2014, the Affordable Care Act will provide more tax-filing fun than ever before.
Actually, most Americans will not have to make any dramatic changes to their tax forms because of the ACA.
If a taxpayer was covered for insurance the entirety of 2014, all they need do is mark on their return that they were covered by an employee-based policy, Medicaid, Medicare, or a personally owned policy.
If that covers your situation, you can relax.
However, if for any part of 2014 you were without health insurance, you need to get your hands on Form 8965, which will determine if you can claim an exemption from the requirement to have insurance (based on religious, ethnic or income level allowances) or to calculate the penalty for the months you did not have coverage.
One of the main elements of the ACA is that everybody who can afford to have insurance must have insurance.
The penalty for not having health insurance in 2014 is a maximum of $95 per adult and half that, $47.50, for children, or 1% of your taxable income above the taxable filing threshold of $10,150, whichever is greater. If you have income greater than $10,000, and you did not have health insurance in 2014, you will pay 1% of your taxable income.
The amount will increase for 2015, to a maximum of $325 per adult, $162.50 for children, or 2% of taxable income. In 2016, the penalty is $695 per adult and $347.50 per child, or 2.5% of a family’s income, whichever is greater.
You avoid the penalty by having health insurance. You can also avoid the penalty by claiming an exemption, and many of those can be claimed directly on the tax return. One such exemption is if your income is below the filing threshold of $10,150 for an individual.
Another exemption from the penalty is if you had a short coverage gap of less than three consecutive months.
Some exemptions are granted through the healthcare marketplace, and could take up to two weeks to process the application. That includes an exemption if health care would cost you more than 8% of your income. In that case, you must get an exemption certificate from the healthcare exchange.
One very important exemption relates to people living in states that chose not to expand their health care programs. If you experienced a particular hardship, and would have been eligible for Medicaid under the new health care law but could not get Medicaid because of your state’s health care law decisions, you are exempt from the tax penalty.
Other exemption include incarcerated citizens, Native Americans who are covered by the Indian Health Service, or people who object to health care for religious reasons.