The Patient Protection and Affordable Care Act became law on March 23, 2010.
During the almost nine years since President Barack Obama signed the health care bill, which usually is shortened to the Affordable Care Act (ACA) or Obamacare, opponents of the law have been working to repeal, maybe replace and definitely weaken it.
Republicans succeeded in late 2017 in eliminating a key component of the ACA. Under the GOP's Tax Cuts and Jobs Act (TCJA), the ACA's individual health insurance mandate.
This is the requirement that you obtain at least minimum essential coverage, or MEC, for yourself and dependents or pay a tax penalty.
However, the repeal of the penalty didn't take effect until Jan. 1 of this year.
That means for the 2018 tax year, whose returns are due this April, you were still required to have ACA acceptable health insurance.
If you didn't, you'll owe the tax penalty, officially titled the shared responsibility payment, when you file.
To make sure you don't overlook or mess up ACA tax-filing tasks this year, here's a quick refresher Q&A.
What's the 2018 tax penalty?
Most people who failed to obtain qualifying health insurance during 2018 will have to pay a penalty of $695 per adult or 2.5 percent of household income, whichever is greater.
There's also a $347.50 penalty for each uninsured child younger than 18.
The maximum penalty is $2,085 per family.
Note that the penalty is calculated using the number of months during the year that you're uninsured. You can get an idea of your potential penalty amount by using the Taxpayer Advocate Service's online shared responsibility estimator tool.
There's also a grace period. You will not be subject to the penalty if you're uninsured for less than three months during 2018.
What's considered minimal essential coverage?
The tax penalty was designed to encourage people to get health care coverage, specially a plan that offers what the ACA considers minimum essential coverage, or MEC.
These generally are plans that cover preventive and wellness-related tests and treatments.
You are considered to have minimum essential coverage and won’t have to pay the penalty if you have:
- Any health insurance plan sold on the Health Insurance Marketplace,
- Any individual insurance plan you already have,
- Any employer plan (including COBRA), including plans that are with or without grandfathered status and retiree plans
- Medicare or Medicaid,
- The Children's Health Insurance Program (CHIP),
- TRICARE (applies to current service members and military retirees, their families and their survivors),
- VA Health Care Program, VA Civilian Health and Medical Program (CHAMPVA) and Spina Bifida Health Care Benefits Program or
- Peace Corps volunteer plans.
Plans that cover only vision or dental care, a specific disease or condition or solely offer discounts on medical services do not count as ACA MEC.
Are there other ways to avoid the penalty?
There are certain circumstances under which you won’t have to pay a penalty even if you don't get ACA minimum medical coverage.
The most common exemption situations are:
- The most affordable coverage costs more than 8.13 percent of your household income,
- You are exempt from filing a tax return because your income is too low,
- You are native American or eligible for health services through an Indian health services provider,
- Your religion objects to the use of insurance,
- You belong to a health care sharing ministry,
- You have been outside the United States for more than one year, or
- You qualify for a hardship exemption due homelessness, bankruptcy, eviction, or similar circumstance.
For more details about the exemptions, including an interactive tool to help determine if you qualify for an exemption, check out Healthcare.gov's exemptions Web page.
What health care forms do I need to file my taxes?
The TCJA still requires for the 2018 tax year that taxpayers report their coverage or qualify for an exemption in order to avoid the tax, officially known as the individual shared responsibility payment.
To do this, you may get multiple ACA information forms. The key ones are the 1095 series:
- Form 1095-A, Health Insurance Marketplace Statement
You'll get this form if you got your MEC through the Marketplace. In these cases, you may qualify for a tax help via the premium tax credit, which you'll claim when you file your return on Form 8962 using the data on your 1095-A. If you received advance health care coverage payments made on your behalf, you'll use the form info and 8962 to reconcile those amounts when you file.
- Form 1095-B, Health Coverage
Health insurance providers, for example, health insurance companies, will send Form 1095-B to individuals they cover. This form shows who was covered and when.
- Form 1095-C, Employer-Provided Health Insurance Offer and Coverage.
Certain employers will send Form 1095-C to certain employees, with information about what coverage the employer offered.
Each of these forms provides information about your health coverage during the prior year. They all are used to determine if you, your spouse and your dependents had health coverage for the entire year and if not, for which months you did have coverage.
Depending on your situation, the 1095 information may be used to claim or reconcile an advance payment of the premium tax credit on Form 8962.
If you are exempt from the MEC requirement, you'll need to file Form 8965.
You don't need to file any of the 1095 forms with your return. Just use the data to complete your taxes and then keep the forms with your tax records.
1095s for 2019, too
You can find more on each of these documents and other ACA related forms at the IRS' online questions and answers page about the various 1095 forms.
Where on my return does my ACA information and/or claims go?
If your 1095 shows that you had MEC for the full tax year, you'll simply need to check the full-year coverage box on your tax return.
That's now found on page 1 near the top of the 2018 tax year's new TCJA-inspired Form 1040.
Other situations, however, will require some more tax work. This is the case if
- you didn't have acceptable medical coverage and owe the penalty,
- want to claim the premium tax credit to help pay for the Marketplace policy you bought,
- must reconcile the advance premium tax credit you received or
- qualified for an exemption from coverage.
The IRS table below will help you meet your tax tasks whatever your ACA circumstances.
The Affordable Care Act and Your Tax Responsibilities
|If You ...||Then You ...|
|Are a U.S. citizen or a non-U.S. citizen living in the United States||Must have qualifying health care coverage, qualify for a health coverage exemption, or make a payment when you file your income tax return.|
|Had coverage or an employer offered coverage to you in the previous year||Will receive one or more of the following forms (discussed, with links, earlier in this post):
|Had health coverage through an employer or under a government program – such as Medicare, Medicaid and coverage for veterans – for the entire year||Just have to check the full-year coverage box on your Form 1040 series return and do not have to read any further.|
|Did not have coverage for any month of the year||Should check the instructions to Form 8965, Health Coverage Exemptions, to see if you are eligible for an exemption.|
|Were eligible for an exemption from coverage for a month||Must claim the exemption or report an exemption already obtained from the Marketplace by completing Form 8965, Health Coverage Exemptions, and submitting it with your tax return.|
|Did not have coverage and were not eligible for an exemption from coverage for any month of the year||Are responsible for making an individual shared responsibility payment when you file your return.|
|Are responsible for making an individual shared responsibility payment||Will report it on your tax return and make the payment with your income taxes.|
|Need qualifying health care coverage for the current year||Can visit HealthCare.gov to find out about the dates of open and special enrollment periods for purchasing qualified health coverage.|
|Enroll in health insurance through the Marketplace for yourself or someone else on your tax return||Might be eligible for the premium tax credit.|
|Received the benefit of more advance payments of the premium tax credit than the amount of credit for which you qualify on your tax return||Will repay the amount in excess of the credit you are allowed subject to a repayment cap.|
|Did not enroll in health insurance from the Marketplace for yourself or anyone else on your tax return||Cannot claim the premium tax credit.|
|Are eligible for the premium tax credit||Can choose when you enroll in coverage to get premium assistance sent to your insurer each month to lower your monthly payments or get all the benefit of the credit when you claim it on your tax return.|
|Are claiming the premium tax credit and did not benefit from advance payments of the premium tax credit||Must file a tax return and IRS Form 8962, Premium Tax Credit (PTC), and claim the credit on the line labeled - Net premium tax credit.|
|Choose to get premium assistance when you enroll in Marketplace coverage||Will have payments sent on your behalf - to your insurance provider. These payments are called advance payments of the premium tax credit.|
|Get the benefit of advance payments of the premium tax credit and experience a significant life change, such as a change in income or marital status||Should report these changes in circumstances to your Marketplace when they happen.|
|Get the benefit of advance payments of the premium tax credit||Will report the payments on your tax return and reconcile the amount of the payments with the amount of credit for which you are eligible.|
The bottom line, directly from the IRS, is that for tax year 2018, your tax return will not be considered complete and accurate if you don't report full-year health insurance coverage, claim a coverage exemption or report a shared responsibility payment on the tax return.
So for this final time — unless, as ACA advocates hope, the law is changed again — make sure you meet your health care tax responsibilities.
You also might find these items of interest:
- Medical deduction threshold stays at 10% for all in 2018
- Many medical tax break amounts affected each year by inflation
- California couple must repay almost $13,000 in Obamacare advance premium tax credits