Don't Let Rising Obamacare Premiums Spook You
With all the news about healthcare premiums going up, and Obamacare imploding, it's easy to be a little spooked about what this means for you and your family... But have no fear! Your local Tax Professional is here!!
After watching days of news about how premiums are expected to go up at least 25%, and in most cases WAY more than that, I wanted to check into what we can do, as Tax Preparers, to help our clients. So here is the information I could find. *All of this information was pulled from the IRS.GOV website, but like any government writings, it is open to interpretation. Please contact your local Marketplace Navigator or Tax Professional before making drastic decisions.
This first graphic shows the penalties for not having "minimum essential coverage." As you can tell, the penalty has gotten much steeper through the years, and it is supposed to be even higher for 2017 (if AHA is still in effect then).
This second graphic shows what the government considers to be "Minimum Essential Coverage."
Although there are a lot of mandates as to what you have to be covered for, there are also some provisions to make sure that it is reasonable for Americans. I'm going to attempt to explain a few exemptions you might* be eligible for when filing your tax return in 2016... you could also file a 1040x for 2015 if any of these applied to your previous tax return.
I printed out a whole list of exemptions to the Affordable Healthcare Act, here are they are;
- Income Below the Filing Threshold- If your gross income or household income was less than your applicable minimum threshold for filing a tax return, you would be exempt from required coverage. In layman's terms, if you don't have to file taxes, don't worry about Obamacare.
**This chart might be a little higher for 2016, but this was the most up-to-date one I could find right now.
-If Coverage is Unaffordable- This is the BIG one for most Americans this year. The rule is that if the minimum amount you would have paid for coverage is more than 8.05% of your household income (MAGI= Adjusted Gross Income + Tax Exempt Interest), you are exempt. If you are eligible for employer-sponsored coverage for your tax household, you do not need to check the Marketplace. If you are ineligible for employer-sponsored coverage, you must check the Marketplace before claiming this exemption.
*An example of this is a family of 3 with a MAGI of $50,000 could pay up to $4025/yr or $335.42/mo, but anything over this amount would be considered "unaffordable."
-Short Gap Coverage- If you go for less than 3 consecutive months without coverage you could be exempt from any penalties. You are considered to have minimum essential coverage for a month if you have it for at least 1 day during the month. If an individual had more than one short coverage gap during the year, the individual is exempt only for the month(s) in the first gap.
*For example, if Colton had coverage every month except Feb, March, Oct, & Nov. Colton is eligible for the short coverage gap exemption only for Feb & Mar.
-Aggregate Self-Only Coverage Considered Unaffordable- Two or more family members' aggregate cost of self-only employer-sponsored coverage was more than 8.05% of household income, as was the cost of any available employer-sponsored coverage for the entire family.
*See example above*
-Resident of a State That Did Not Expand Medicaid- If your household income was below 138% of the federal poverty line for your family size and at any time in 2015 you resided in a state that didn't participate in the Medicaid expansion under the Affordable Care Act you would be exempt from penalties. States that didn't expand Medicaid are: Alabama, Alaska, Florida, Georgia, Idaho, Indiana, Kansas, Louisiana, Maine, Mississippi, Missouri, Montana, Nebraska, North Carolina, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, Wisconsin, and Wyoming.
* A family of 4 in Texas would be exempt if household income were less than $33,534.
-Member of Tax Household Born, Adopted, or Died- During 2016 a child was added to your tax household by birth or adoption, or a member of your tax household died during the year, and you can't check the full-year coverage checkbox on your return. In layman's terms- 1) An individual is included in your tax household ONLY for the full months they were alive. 2) A child (born or adopted) is included in your tax household ONLY for the full months following the event.
Other Exemptions that MUST Be Granted By the Marketplace
There are a number of other exemptions to the penalties assessed by the AHA, but these exemptions must be granted by the Marketplace. Here is a brief list, but please contact the marketplace, IRS, or your local Tax Professional, for more details on these;
-Members of a Health Care Sharing Ministry
-Members of Indian Tribes
-Individuals who were Incarcerated
-Members of Certain Religious Sects
-Individuals who were Determined to Be Ineligible For Medicaid in a State That Didn't Expand Medicaid Coverage
-Coverage Considered Unaffordable Based on Projected Income
-Unable to Renew Existing Coverage
-Certain Medicaid Programs that are Not Minimum Essential Coverage
I hope this goes a long way in easing the pain associated with the Affordable Healthcare Act... Personal feelings aside, I see what the intention of this plan was and am hoping the information provided clears up some misconceptions.
If you have any questions, please visit with your local Tax Professional, Marketplace Navigator, or IRS Branch. Here in San Angelo there are a few Marketplace Navigators at the La Esperanza Clinics who are happy to help walk you through the process of getting affordable insurance. I know all of us at A+ Tax Service would be glad to consult with you, to the extent of our knowledge, on how your choices will affect your tax return.
*We are all prone to make mistakes, so if you have questions, please consult your tax professional or contact your local IRS branch