Health Care and Taxes. It may not be the most exciting topic but it’s something you need to know about, and trust me, it’s not as complicated as it may seem. With the calendar year coming to a close, it’s a good idea to educate yourself about how the health care law will affect your taxes. Today I’m going to go over how the two come together and what it means for you come tax season.
What You Need to Know
This is the first year that all Americans have been required to maintain health insurance. This was mandated through the The Affordable Care Act (ACA) or “Obamacare.” It was designed to ensure everyone has health insurance and imposes tax penalties on those who don’t. 2014 is the first year all Americans are required to maintain health insurance, so you’ll be reporting it on your taxes in 2015.
This may seem overwhelming, but for most people (9 out of 10 taxpayers), complying with the ACA on taxes is as simple as checking a box on their tax return to confirm they have health insurance. The new requirement to report health care on your taxes does NOT mean people need to pay extra for a tax preparer — your hard earned money should go to care, not compliance. TurboTax Health can provide you with the tools to understand both health care and your taxes.
TurboTax has been simplifying the federal tax code for the past 30 years and has done the same with the ACA. With software like TurboTax, you’re never exposed to the ACA forms — TurboTax has already done the work for you and will ask you the questions you need to answer so you can be confident your taxes are done right.
Taxpayers will fall into three categories when it comes to ACA and taxes: those insured through an employer, those insured through health care exchanges, and those who are uninsured. Here’s what you need to know:
For most people (9 out of 10 taxpayers), complying with the ACA on taxes is a non-event because they have insurance through their employer, Medicaid, Medicare, or a private provider (Congressional Budget Office). They will just check a box on their tax return to confirm they have health insurance. There’s no need to spend more on tax preparation.
Insured through Exchanges:
This year 8 million people became insured through healthcare.gov or their state exchange (Congressional Budget Office). Those who purchased insurance through the exchanges will receive a 1095-A form from healthcare.gov or their state exchange. They will enter information from their 1095-A on their taxes, just like they do with their W-2 forms.
Roughly 42 million people are uninsured in America (Congressional Budget Office). Those who do not have insurance and don’t qualify for exemptions will pay a penalty of about $95 or about 1% of their income. If you’re currently uninsured, think about buying insurance this year during open enrollment. TurboTax has a free calculator to estimate how much your penalty may be for 2014. The health care penalty is based on your family size and income. You can find the free calculator at TurboTax Health.
What About Exemptions?
About half of people who are uninsured (23 million) could qualify for an exemption, but most people are unaware and will end up paying unnecessary penalties (Congressional Budget Office). Only 5% of people who qualify for an exemption have applied (TurboTax). There are a number of reasons why someone may be exempt from the penalty for not having health insurance, like not meeting the minimum income requirement. TurboTax Health offers free tools to help you understand if you might qualify for an exemption.
2015 Health Care Enrollment
To enroll for insurance through the Marketplace for 2015, Americans must sign up during open enrollment period, November 15, 2014 through February 15, 2015. Americans who can’t afford health care through an employer or out of pocket, can enroll for insurance through the Marketplace and may even qualify for government assistance though premium tax credits and subsidies. Eligibility is generally determined by household income and family size. People can see if they’re eligible for a subsidy by checking out TurboTax’s health care calculator at TurboTax Health.
I hope all this information has eased your fears about how the new health care law will affect your taxes. If you would like to learn more, visit TurboTax Health.
I was selected for this opportunity as a member of Clever Girls and the content and opinions expressed here are all my own.