No Health Insurance? How To Avoid The Penalty
Didn't have insurance coverage last year? You may now be facing the new penalty for not having sufficient coverage (officially called the Individual Responsibility Payment) when filing your taxes. But there's good news even if you've gotten this far into the process: you may be able to claim an exemption to the penalty.
How do you claim an exemption? There are several categories of individuals exempt to the Individual Responsibility Payment. They include:
Below the Filing Threshold. If your income falls below the threshold necessary to be required to file ($10,150 in 2014 for most individuals under 65), you are automatically exempt from the penalty payment.
Gaps in Coverage. Missing out on coverage for less than 3 months, at any consecutive time during the year, will not result in a penalty.
Groups Specifically Exempt. Certain individuals have been defined as regularly exempt from the penalty. These include persons not lawfully in the United States, incarcerated persons, and members of certain religious sects or Indian tribes.
Those Without Access to Affordable Coverage. While many people might feel that their health insurance options are not 'affordable', the ACA actually defines this idea. It falls into two main categories:
Being Denied Expanded Medicaid. If you live in a state that chose not to expand the Medicaid program and you would have otherwise qualified for Medicaid under the ACA rules, you are not subject to a penalty for not having coverage.
Having Access to Coverage, but at More Than 8% of Adjusted Gross Income. This rule generally means that 2 or more people in your tax household cannot get individual coverage for less than 8% total of your family income, or that your family coverage offered through your employer is more than the same 8%.
How to Claim an Exemption
If you fit into one of the categories above, you can claim an exemption in one of two places: when filing your taxes or via your state's heath insurance marketplace. Most exemptions can be claimed on Form 8965 when filing your taxes in the spring. However, exemptions based on being part of exempt groups (such as incarceration, religious groups or Indian tribes) can be received either through tax filing or through the Marketplace.
If you're unsure of whether you might be eligible to claim an exemption, seek out a qualified tax preparer (such as one at Jeff Baker & Associates, PS or elsewhere) to help complete the Form 8965.
Although it can be tough to navigate the new rules under the Affordable Care Act, it may not be necessary to simply accept paying the penalty if you can't find coverage that works for you. Whether it's through the state Marketplace or on your tax forms, you may be able to avoid this new tax until such time as you can find appropriate coverage.