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Tax Impacts of the Affordable Care Act (ACA)

The Patient Protection and Affordable Care Act (ACA) is a healthcare reform law enacted in March 2010, that affected every American. Tax Reform enacted in 2017 reset the federal penalty to $0 for any taxpayer without health insurance. 

Beginning in 2019, tax reform has reduced the penalty for not having health insurance to zero.

Exemptions from the ACA Tax Penalty

Exemptions from the penalty are no longer necessary since the penalty is $0 beginning 2019.

Tip/Help

If you purchased health insurance through the state marketplace, you must still file IRS Form 8962 using the amounts from Form 1095A to reconcile your Premium Tax Credit.

Membership Exemptions

Members of certain protected groups, both ethnic and religious, qualify for an exemption.

  • Members of all recognized Native American and Alaska Native tribes and anyone eligible to receive care from the Federal Indian Health Service
  • Members of healthcare-sharing religious ministries, where members pledge to pay each other’s’ medical bills
  • Members of federally recognized religious groups that object to all forms of insurance, not just health care insurance.

Legal Status Exemptions

If you are not “lawfully present” in the United States or if you are incarcerated, you qualify for an exemption.

  • Not “lawfully present” includes US citizens living abroad and a certain types of non-citizen.
  • Incarceration includes both being in jail awaiting trial, and prison.

Hardship Exemptions

It can be hard to afford health insurance coverage in some cases and the government recognizes that fact so a “hardship exemption” was included in the ACA. While these are not permanent exemptions, they were designed to last until you are able to reasonably afford health care coverage. Here are some things that might qualify you for an exemption:

  • Homelessness
  • Eviction from your home or foreclosure
  • Fire, flood, or other disaster causing major damage to your home
  • Bankruptcy
  • Death of a family member
  • High debt from medical bills
  • Expensive care for a sick, disabled or aging relative

These are only a few examples as there are many more qualifiers that may exempt you from the ACA penalty. The government decides on each applicant for an exemption based on their specific situation, so make sure you include all important details. If approved, you will receive a hardship exemption number to include on your tax return to reduce, or remove the penalty.

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