The Affordable Care Act at Tax Time

If this is the first year you've been affected by the Affordable Care Act, you may not really know what to expect at tax time. For starters, the bill mandates that all taxpayers have health insurance, and offers a credit to help offset the cost of monthly premiums.

According to the IRS, approximately 80% of taxpayers won’t be affected or notice an impact. The other 20%, however, may notice a big difference at tax-time when it comes to their return. The Affordable Care Act will affect you based on your health care coverage status.

Types of Health Care Coverage
There are four different levels of health care coverage that factor into how you will be taxed under the Affordable Care Act.

1. Government or Employer sponsored: Generally, these taxpayers are within the 80% that don’t notice much of a change. Whether you have Medicaid, Medicare, or coverage through your job, you only need to check a line on your tax form that indicates you are covered.
2. Marketplace with Tax Credit: A new tax form is sent to taxpayers who purchased health care coverage through the Health Insurance Marketplace. Form 1095-A Health Insurance Marketplace Statement will document all the information you need to file your taxes. If you opted for a premium subsidy, you’ll need to reconcile the amount you received as a credit with the amount you are actually eligible to receive, resulting in either a refund or required payment.
3. Direct Coverage without Credit: in some cases taxpayers can opt to purchase care directly from an insurance company, while others may not have opted to use the premium tax credit on a Marketplace plan. Taxpayers who are directly covered just have to check the appropriate line on the tax form to indicate coverage, while plans without a subsidy will require important information from the Form 1095-A in order to file taxes.
4. No coverage: taxpayers who remain uncovered for three or more months may have to pay a penalty. While the calculation for the penalty is complicated, if you aren't required to pay taxes because your income is below $10,150 as a single filer, you won’t be subject to the penalty, which normally ranges between $95 to $11,000.

The Affordable Care Act has many exemptions that can be applied for, though some have to be claimed directly through the health care exchange. Otherwise, you can claim exemptions on the Form 8965 in which you reconcile your premium credit.