The Affordable Health Care Act, otherwise known as ObamaCare, is designed to make sure every patient has an opportunity to buy insurance that is affordable based on his or her level of income. Beginning with the 2014 tax year—that is, tax returns that taxpayers must file by April 15, 2015—ObamaCare will begin to affect the income tax owed on each taxpayer’s federal income tax return.
Read on to learn more about the various ways ObamaCare may affect your income tax return next year.
Requirement for Coverage
ObamaCare requires that you have healthcare insurance coverage or obtain an exemption. Whether or not you have healthcare insurance coverage, and if you do, where you obtain your insurance from, will play into determining the affect ObamaCare has on your income tax.
For many individuals who already have healthcare insurance provided by their employers, they will not have to take any additional steps to obtain coverage acceptable under the guidelines of ObamaCare. If you do not have healthcare insurance coverage through your employer, you can obtain insurance coverage through a state or federal health insurance marketplace.
Exemptions from ObamaCare are available for individuals who meet certain financial or other criteria as defined by the IRS.
Premium Tax Credit
If you choose to purchase healthcare insurance coverage through a health insurance marketplace, you may be eligible to receive a Premium Tax Credit. The goal of the Premium Tax Credit is to help offset some of the cost of health insurance, thereby making insurance affordable for many who could not otherwise pay for health insurance coverage.
The Premium Tax Credit may be paid directly to your insurance company or directly to you when you file your tax return. Keep in mind that if you qualify for a Premium Tax Credit and then your circumstances change, you need to report those changes to the health insurance marketplace, so they can adjust your Premium Tax Credit appropriately. Failing to report a change in circumstances to the health insurance marketplace may result in a reduction in the amount of a tax refund you expected to receive or in you actually owing money on your tax return.
Payments for Lack of Insurance Coverage
If you do not obtain qualifying insurance coverage through your employer or the health insurance marketplace or obtain an exemption from purchasing health insurance coverage, you may have to make an Individual Shared Responsibility payment on your tax return. The Individual Shared Responsibility payment is in essence a penalty for failing to adhere to the health coverage requirements of ObamaCare.
For the 2014 tax year, the Individual Shared Responsibility amount for a household without coverage is 1% of your household income above your filing threshold or $95 for each adult and $47.50 for each child, whichever is greater. The Individual Shared Responsibility has a maximum of $285 for a family for 2014. The Individual Shared Responsibility will increase to 2.5% of household income by 2016.
The forms you use to file your tax return will have a section where you can report your insurance coverage or exemptions or make your Individual Shared Responsibility payment.
How can I get help with preparing my tax return?
If you need help preparing your tax return, speaking with a tax attorney is the best place to start. Only a tax attorney will have the knowledge and experience to help you prepare your tax return while also providing the protection of confidentiality afforded under attorney-client privilege.
You can contact a tax attorney by completing the form beneath this article or by calling the phone number located at the top of this web site. The first conversation is free and it only takes a few minutes to get start, so take the first step to getting the help you need with your tax return today.
Connect with Mark on Google+
Mark has been a contributor to legal web sites related to bankruptcy, tax, and criminal law since 2011. He has an Accounting degree from Texas A&M University.