Exemptions from the Uninsured Tax Penalty
Beginning in the 2014 tax year, the Affordable Care Act legislates an annual penalty for not being insured (see the following article on the penalty).
The Affordable Care Act has provisions for exemptions from the Uninsured Tax Penalty. In order to qualify for the exemption, you must fulfill at least one of the following criteria:
- You are uninsured for less than 3 months of the year
- Your income is below the amount that requires you to file a tax return
- Your health insurance costs account for more than 8% of your income even after thegovernment subsidies and employer contributions are applied against those costs
- You are a member of a recognized Indian tribe or eligible for services through an Indian HealthServices provider
- You are a member of a religion (e.g. Old Order Amish) that has religious objections to insuranceincluding Medicaid and Social Security
- You are a member of a health care sharing ministry
- You are an unlawfully present of the United States
- You are an American citizen that is incarcerated and is not awaiting a disposition of the chargesagainst you
There are also hardship exemptions. These include:
- You are homeless
- You were evicted in the last 6 months or were faced with eviction or foreclosure
- You filed for bankruptcy in the last 6 months
- You received a shut-off notification from a utility company
- You couldn’t pay for medical expenses in the last 24 months
- You were recently the victim of domestic violence
- You recently experienced a death in the family
- You experienced a natural or human-made disaster (such as fire or flood) that caused significantdamage to your property
- You experienced unexpected increases in necessary expenses due to caring for an ill, disabled,or aging family member
- You expect to claim a child as a tax dependent who’s been denied coverage in Medicaid andCHIP, and another person is required by court order to give medical support to the child. In thiscase, you do not have to pay the penalty for the child.
- As a result of an eligibility appeals decision, you’re eligible for enrollment in a qualified healthplan (QHP) through the Marketplace, lower costs on your monthly premiums, or cost-sharingreductions for a time period when you weren’t enrolled in a QHP through the Marketplace.
- You were determined ineligible for Medicaid because your state didn’t expand eligibility forMedicaid under the Affordable Care Act.
How to Apply for an Exemption
How you apply for the exemption under the Affordable Care Act depends on which exemption it is based on.
If you are applying for an exemption based on coverage being unaffordable, membership in a health care sharing ministry, you are a member of a federally-recognized tribe or being incarcerated, you have two options: 1) You can claim these exemptions when you fill out your 2014 federal tax return, which is due the following April or 2) you can apply for the exemptions in the Health Insurance Marketplace.
If your exemption is based on membership in a recognized religious sect that objects to insurance, eligibility for services through an Indian health care provider or one of the hardship exemptions, you will need to fill out an exemption application in the Marketplace.
You do not need to file for an exemption if your income is below the federally required minimum to file a tax return. This is true even if you file a return to receive a refund of the taxes that were withheld from your paycheck. In addition, you do not have to file for an exemption if you have a gap in coverage that is less than 3 months or are unlawfully present in the United States. These will be addressed when you file your tax return.