Genesis Tax House

The ACA has changed the landscape of both health care and taxes. This section tackles all the topics related to taxes and the ACA.   We’ll explain things like the Advance Premium Tax Credit, penalties, and exemptions so that you will understand if and how your taxes may be impacted.

TAX CREDITS – As part of ACA, this is how the government provides financial help to lower the monthly cost of health insurance.  Tax credits are usually claimed when you file your tax return. The Advance Premium Tax Credit works differently.  After you enroll in a Marketplace health insurance plan and are determined eligible for the Advance Premium Tax Credit, this tax credit is ADVANCED to the health insurance company on your behalf and applied directly to your monthly health insurance premium, to lower your monthly cost. This occurs throughout the year, before you file your tax return.

When you enroll in a Marketplace health insurance plan, you are asked to provide an estimate of your household income.   This estimate, along with the number of people in your household, is used to determine your eligibility for the Advance Premium Tax Credit.  It’s also used to determine how much tax credit you receive.

If you and/or a member of your household receive the Advance Premium Tax Credit, the tax credit must be reconciled when you file your tax return. The Advance Premium Tax Credit amount that you received was based on an estimate of your household income and your expected family size.  So when you file your taxes the amount of Advance Premium Tax Credit you received will be reconciled against what you were actually eligible for based on your actual household income.

If your actual income was less than what you estimated, you may get money back, which could increase your refund amount.  However, if your actual income was more than what you estimated, you may need to repay some of your Advance Premium Tax Credit, which could reduce your refund amount. The credit could also be affected by changes in your family size, such as the birth of a child.

If you and/or members of your household did not have qualified health insurance coverage for some or all of 2014, you may face a tax penalty, unless you qualify for an exemption. Here is all the information you need to understand ACA tax penalties and to find out whether you may qualify for an exemption.

The ACA now requires almost everyone to have health insurance. However, some people may choose not to enroll in health insurance. If you choose not to enroll there may be consequences in the form of a tax penalty, unless you qualify for an exemption. A penalty could mean your refund might be reduced, or you could pay more if you owe taxes at the end of the year.

The penalty is calculated one of two ways. If you or members of your household don’t have insurance that qualifies as minimum essential coverage you’ll pay whichever of these amounts is higher:

Per Adult             Per Child                       Max per Household

2014          $95                      $47                                $285

2015          $325                    $162                              $975

2016          $695                    $347                              $2085

Or percentage Penalty

2014          1%

2015          2%

2016          2.5%

Depending which is greater.

Depending on your circumstances, you may qualify for an exemption to either lower your tax penalty or eliminate it altogether. Many kinds of exemptions can be claimed on your tax return; however, you may need to apply for some exemptions and get Marketplace approval. Good thing there’s also an easy way to understand it all. Allow us to explain…Exemptions are based on factors such as financial hardships, religious affiliations, and gaps in coverage – just to name a few.