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How the Affordable Care Act (ACA) will Affect Your Tax Return

How the Affordable Care Act (ACA) will Affect Your Tax Return

Did you experience a drop in your insurance premiums this year from the government subsidies (Premium Assistance Credit) you received to help pay for your premiums?  Or maybe you saw your premiums double because you fell off the income limit cliff and didn’t qualify for any subsidies from the government?  Whether you’re among those who welcome the Affordable Care Act or among those who fervently oppose it, the fact is that it’s here, and we need to know how to deal with it.

We have put together a summary of what you as an individual taxpayer need to know about the Affordable Care Act (ACA) and how if affects your tax return:

1)    If you purchased health insurance through the federal Health Insurance Exchange and your household income is between 100% and 400% of the Federal Poverty Level, you may be eligible for a Premium Assistance Credit from the government to cover part of your insurance premiums.  The eligibility for the credit is based on income for the past two years compared to the poverty level for the family size.  Married couples must file Married Filing Jointly to be eligible.  If you paid too much in premiums based on your income, you’ll receive a refundable income tax credit.  However, if you paid too little based on your income you’ll owe the government for the underpayment.

2)    The penalty for not having Minimum Essential Health Coverage (Bronze plan which covers 60% of medical costs, e.g.) for 2014 is the greater of (a) $95 per individual divided by 12 or (b) 1% of “household income” divided by 12 multiplied by the number of months in which there is no Minimum Essential Health Coverage (this increases to $325 per individual or 2% of household income for 2015 and $695 per individual or 2.5% of household income for 2016).  The IRS can only collect the penalty by seizing tax refunds.  They are prohibited from prosecuting you, assessing interest and penalties, and imposing liens and seizures.  If the tax payer had Minimum Essential Health Coverage for at least 10 months out of the year, it’s considered being covered for the entire year.

3)    Recognized religious groups that object to receiving health care benefits, health care sharing ministry members, and prisoners may receive exemptions from health insurance coverage required by the ACA.  Certain aliens are also exempt. 

                       Other situations where people may be exempted from the coverage requirement:

o   People whose lowest cost premium is greater than 8% of their household income. 

o   People whose income is below the filing threshold ($10,000 for single filers and $20,000 for MFJ filers). 

o   Taxpayers ineligible for Medicaid in states that did not expand Medicaid coverage to comply with the Minimum Essential Health Coverage         requirement (Georgia is among these states).

o   Native Americans eligible for Indian tribe health care provider services.

o   People with certain hardships.

o   People who have lapses of coverage of less than three consecutive months.

o   Citizens and resident aliens physically present in other countries for at least 330 days within a 12-month period.

What you need to provide to your CPA or other tax preparer to prepare your tax return:

1)    Form 1095-A if you purchased health insurance through the federal Exchange.  If this form is incomplete or unavailable you should provide your monthly health insurance premiums paid, year-end pay stubs, and health insurance membership card.

2)    Exemption Certificate Number if you are claiming an exemption from Minimum Essential Coverage under the ACA due to being a member of a recognized religious group or sect, being ineligible for Medicaid in a state that did not expand Medicaid coverage to comply with the ACA, considering health coverage to be unaffordable based on your projected household income, being unable to renew your previous health insurance policy and considering other plans to be unaffordable, being a member of AmeriCorps, or experiencing a qualified hardship.  Exemption Certificate Numbers must be applied for by completing the application at the internet site and mailed to the Department of Health and Human Services.


Allen & Company, PC  - a CPA firm serving Kennesaw, Marietta, Acworth, Woodstock and north Atlanta.  Providing accounting, financial statement audit, taxation, and advisory services for individuals and businesses.  Extensive experience working with franchised restaurants and other franchised businesses.