Big changes may await the Affordable Care Act in 2017, however all requirements and provisions in relation to taxes remain relevant for 2016 returns. As tax season begins, the Form 1095-A, Health Insurance Marketplace Statement will play an important role when you file your tax return. You should also be aware that this tax year brings an increase in the individual shared responsibility payment amount, though there are exemptions from the requirement to have health insurance just as there were in years prior.
Around 10 million individuals received health insurance through a Federal or State Marketplace in 2016, which means these taxpayers will receive a Form 1095-A, Health Insurance Marketplace Statement. This form is needed to accurately complete Form 8962, Premium Tax Credit. If you received a subsidy in order to reduce the amount of your monthly premium, you’ll have to reconcile the amount you received with the actual credit amount you are entitled to.
You can expect to receive your Form 1095-A no later than January 31, 2017 if you used a Federal Marketplace. State Marketplace forms may take until the beginning of February, 2017, though you may be able to access the form online through healthcare.gov in January 2107. Those who used a Federal Marketplace to purchase their health coverage can log on to the site to retrieve a copy of the form.
A completed Form 8962 is required to be included with your tax return if you received a premium tax credit subsidy. If you forget to include it, your return may take longer to process.
Health Care Coverage Exemptions
Some individuals who don’t have health insurance for part of 2016 or throughout the entire year may have qualified for an exemption. Those who are eligible for an exemption to the requirement of having health insurance aren’t forced to pay a penalty. So, before you calculate an owed penalty amount, check to see if you qualify for an exemption.
If applicable, you should complete the appropriate sections of the Form 8965, Health Coverage Exemptions, and ensure you include the form with your federal tax return. Some exemptions must be applied for in the Marketplace, while some can be requested when you file your taxes, so research which category your exemption falls into. The Marketplace website has a tool to help determine if an exemption is available for your situation.
Individual Penalty (Shared Responsibility Payment)
For 2016, the penalty for not having health insurance coverage for taxpayers who aren’t exempt is the greater of two options:
- 5% of the individual’s income exceeding their 2016 filing threshold (personal exemptions plus standard deduction for their filing status)
- A flat dollar amount assessed to the taxpayer, their spouse, and their dependents at $695 for taxpayer, spouse, and dependents over age 18; $347.50 for dependents under age 18. The flat dollar penalty maxes out at $2,085 for a family in 2016.
The amount of the penalty for this tax year is limited to the average premium of a bronze level health care plan. In the Marketplace that national average is $2,676 per individual ($223 per month per individual) maxing out at $13,380 for a family of five ($1,115/month).