As required by the Affordable Care Act (a.k.a. “Obamacare”) individuals were required beginning in 2014 to purchase qualified health care coverage for themselves, their spouse (if filing jointly) and their dependents. If the taxpayer failed to obtain coverage or allowed the coverage to lapse during the year, they must qualify for a health coverage exemption or pay a penalty (a.k.a. “share responsibility payment”).

Health coverage exemptions can either be granted directly by the Marketplace (i.e. a state insurance exchange) or be claimed on the taxpayer’s annual income tax return. In either case, the exemption is reported on the taxpayer’s income tax return.

The Marketplace will grant a health care exemption for the following circumstances:

• The individual is a member of a health care sharing ministry;
• The individual is a member of a federally-recognized Indian tribe;
• The individual is in a jail, prison or similar penal institution or correctional facility;
• The individual is a member of certain recognized religious sects; or
• The individual qualifies for a hardship.

The hardships the Marketplace recognized included the following:

• The individual is an American Indian, Alaska native, or the spouse or descendent of either who is eligible for services through an Indian health care provider;
• The individual is experiencing circumstances that prevents them from obtaining coverage under a qualified health plan;
• The individual does not have access to affordable coverage based on their projected household income;
• The individual is ineligible for Medicaid solely because they live in a state which did not participate in the Medicaid expansion under the Affordable Care Act; or
• The individual has been notified that the health insurance policy they currently have will not be renewed and other plans available are unaffordable.

If the taxpayer did not receive an exemption during 2014 from the Marketplace, they can still claim a health coverage exemption on their tax return for the following circumstances:

• The individual cannot afford coverage because the minimum amount for premiums is more than 8% of household income;
• The individual went without coverage for less than 3 consecutive months during the year;
• The individual is a U.S. citizen living abroad or certain non U.S. citizens;
• The individual’s household income is below the minimum threshold for filing a tax return;
• The individual is a member of a health care sharing ministry, a member of federally-recognized Indian tribe, or incarcerated; or
• The individual qualifies for a hardship.

The hardships the taxpayer can recognize include the following:

• Two or more family members’ aggregate cost of self-only employer-sponsored coverage is more than 8% of household income, as is the cost of any available employer-sponsored coverage for the entire family;
• The individual purchased insurance through the Marketplace during the initial enrollment period but had a coverage gap at the beginning of 2014;
• The individual applied for CHIP coverage during the initial open enrollment period and was found eligible for CHIP based on that application but had a coverage gap at the beginning of 2014;
• The individual is an American Indian, Alaska native, or the spouse or descendent of either who is eligible for services through an Indian health care provider; or
• The individual’s gross income is below the filing threshold.

Obamacare and the resulting regulations rolled out by the Internal Revenue Service can be complex. Do not pay the penalty on the tax return if it is not required. Contact Flexible Accounting Services of the Triangle today and let us assist you in determining if you qualify for one of the health coverage exemptions.