It’s that joyous time of year when W-2s, 1099s and the other forms we need for our taxes start landing in our mailboxes.
The 1095-A is just the beginning. Obamacare made some big changes to the tax system, and as a result, filing income taxes will be more complicated for some people.
Q: There’s supposedly an exemption to the Obamacare insurance requirement if you can’t find an affordable health plan. But I’m having difficulty obtaining information about it. Can you explain?
A: There is, indeed, such an exemption. And there are many others.
First, a refresher: the Affordable Care Act (ACA) requires most people to have health insurance or face a . If you were uninsured for all – or part – of last year, judgment day is approaching with the April 15 tax filing deadline.
I won’t describe the actual penalty amounts in detail because . (You can search my previous columns at .) In short, some of you could owe hundreds or thousands of dollars for remaining uninsured last year.
But Obamacare gives some people an “out” in the form of exemptions. And by “some people,” I’m talking millions.
The Congressional Budget Office that roughly 30 million still will be uninsured in 2016, when the penalties reach their maximum levels. Of those, it estimates more than 23 million will qualify for one or more exemptions.
· you cannot find “affordable” coverage, meaning the cost of your premium would be more than 8 percent of household income.
· your household income is low enough that you’re not required to file a federal tax return. For tax year 2014, for individuals under 65 is $10,150 and it’s $20,300 for married couples filing jointly. (You don’t have to file a return to obtain this exemption.)
Wouldn’t it be great if there were one simple way to apply for any exemption? It would, but there isn’t. Assuming you’re eligible, you also have to reapply each year, says Karen Pollitz, a senior fellow at the .
“In some cases, it’s automatic. You don’t have to lift a finger. In other cases, you just check a box on your tax return,” she says.
But “in some cases, you would have to file a written application,” she says.
In general, it’s the federal government, not the state, that approves – or denies – your exemption.
What about the others?
This brings me back to the original question about the affordability exemption, which applies when the minimum amount you would have paid for health insurance premiums is more than 8 percent of your household income.
You’ll need to figure out what the lowest-cost bronze plan from Covered California would have cost you, or the cheapest coverage from your employer. Math is required.
“My piece of advice for people is to make sure you’re not eligible for any other exemption first,” says Tara Straw, senior health policy analyst for the . “This is kind of like your last-ditch exemption.”
There’s also a way to apply for the affordability exemption for months in the future, as opposed to requesting it on your taxes for the previous year. Why would you do this? For one, by showing you can’t afford regular plans, you could become eligible for a cheaper catastrophic plan that has much higher out-of-pocket costs.
Luckily, there’s help for consumers.
Since we’re dealing with tax laws, bureaucracies, crunching numbers, human error and more, my best advice would be to consult a tax professional, especially for one of the more complicated exemptions.
In the end, thankfully, most people will avoid this process altogether.
“If you had coverage all year long, there’s just a box on your taxes that says ‘I had coverage for all 12 months of 2014’,” Pollitz says. “If you can check yes, you’re done.”
Questions for Emily:
Click here to find previous Ask Emily columns.
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