Are you eligible for the Premium Tax Credit?

The premium tax credit can help make purchasing health insurance coverage more affordable for people with moderate incomes

Are you eligible for the Premium Tax Credit?

The premium tax credit can help make purchasing health insurance coverage more affordable for people with moderate incomes.

Question 1: Did you or a family member enroll in insurance through the Marketplace?

If you answer no to question 1, you are not eligible for PTC.

If you answer yes to question 1, move on to the next question.

Question 2: Are you and every member of your family eligible for coverage through an employer or government plan?

If you answer yes to question 2, you are not eligible for PTC.

If you answer no to question 2, move on to the next question.

Footnote about question 2: there are special rules about what it means to be eligible for employer or government coverage. See Publication 974 for more information.

Question 3: Is your household income at least 100 percent, but no more than 400 percent, of the federal poverty line for your family size?

If you answer no to question 3, you are not eligible for PTC.

If you answer yes to question 3, move on to the next question.

Footnote about question 3: Under special circumstances, you may be able to claim the PTC even though your income is below 100 percent of the federal poverty line. See the instructions for Form 8962 for more information.

Question 4: Can you be claimed as a dependent on someone else’s tax return?

If you answer yes to question 4, you are not eligible for PTC.

If you answer no to question 4, move on to the next question.

Question 5: Is your filing status Married Filing Separately?

If you answer yes to question 5, you are not eligible for PTC.

If you answer no to question 5, move on to the next question.

Footnote about question 5: There are exceptions to the married filing separately rule. Certain victims of domestic abuse and spousal abandonment can claim the premium tax credit using the married filing separately filing status. See the instructions for Form 8962 for more information.

Question 6: Were all the premiums paid?

If you answer no to question 6, you are not eligible for PTC.

If you answer yes to question 6, you may be allowed a premium tax credit.  See Form 8962, Premium Tax Credit, and the Form 8962 instructions for more information.

2016 health coverage tax information forms

IRS Extends Due Date for Employers and Providers to Issue Health Coverage Forms to Individuals

On November 18, 2016, the IRS extended the 2017 due date for providing 2016 health coverage information forms to individuals. Insurers, self-insuring employers, other coverage providers, and applicable large employers now have until March 2, 2017 to provide Forms 1095-B or 1095-C to individuals, which is a 30-day extension from the original due date of January 31.

Notice 2016-70, also extends transition relief from certain penalties (IRC Sections 6721 and 6722) to providers and employers that can show that they have made good-faith efforts to comply with the information-reporting requirements for 2016 for incorrect or incomplete information reported on the return or statement.  This Notice also provides guidance to individuals who, as a result of these extensions, might not receive a Form 1095-B or Form 1095-C by the time they file their 2016 tax returns.is also abating penalties for inadvertent errors and omissions where there was a good-faith effort to comply with the reporting requirements.

The due dates for filing 2016 information returns with the IRS remain unchanged for 2017. The 2017 due dates are February 28 for paper filers and March 31 for electronic filers. This chart can help you understand the upcoming deadlines.

Due to these extensions, individuals may not receive Forms 1095-B or 1095-C by the time they are ready to file their 2016 individual income tax return. While information on these forms may assist in preparing a return, the forms are not required to file. Taxpayers can prepare and file their returns using other information about their health insurance and do not have to wait for Forms 1095-B or 1095-C to file.

Health Care Form Deadlines

The IRS extended the 2017 due date for employers and coverage providers to furnish information statements to individuals.  The due dates to file those returns with the IRS are not extended. This chart can help you understand the upcoming deadlines.

Action 2017 Reporting Due Dates for…
Applicable Large Employers – Including Those That Are Self-Insured Self-insured Employers That Are Not Applicable Large Employers Coverage Providers  – other than Self-Insured Applicable Large Employers*
Provide 1095-B to responsible individuals Not Applicable** Mar. 2 Mar. 2
File 1094-B and  1095-B with the IRS Not Applicable** Paper: Feb. 28

E-file: Mar. 31*

 

Paper: Feb. 28

E-file: Mar. 31*

 

Provide 1095-C to full-time employees Mar. 2 Not Applicable Not Applicable
File 1095-C and 1094-C with the IRS Paper: Feb. 28

E-file: Mar. 31*

 

Not Applicable Not Applicable

 

Health Flexible Spending Arrangements 2017 FSA Limits

FSAs provide employees a way to use tax-free dollars to pay medical expenses not covered by other health plans. Because eligible employees need to decide how much to contribute through payroll deductions before the plan year begins, many employers this fall are offering their employees the option to participate during the 2017 plan year.

Interested employees wishing to contribute during the new year must make this choice again for 2017, even if they contributed in 2016. Self-employed individuals are not eligible.

An employee who chooses to participate can contribute up to $2,600 during the 2017 plan year. Amounts contributed are not subject to federal income tax, Social Security tax or Medicare tax. If the plan allows, the employer may also contribute to an employee’s FSA.

Throughout the year, employees can then use funds to pay qualified medical expenses not covered by their health plan, including co-pays, deductibles and a variety of medical products and services ranging from dental and vision care to eyeglasses and hearing aids. Interested employees should check with their employer for details on eligible expenses and claim procedures.

Under the use or lose provision, participating employees often must incur eligible expenses by the end of the plan year, or forfeit any unspent amounts. But under a special rule, employers may, if they choose, offer participating employees more time through either the carryover option or the grace period option.

Under the carryover option, an employee can carry over up to $500 of unused funds to the following plan year — for example, an employee with $500 of unspent funds at the end of 2017 would still have those funds available to use in 2018. Under the grace period option, an employee has until 2½ months after the end of the plan year to incur eligible expenses — for example, March 15, 2018, for a plan year ending on Dec. 31, 2017. Employers can offer either option, but not both, or none at all.

2017 HSA Health Savings Account Information

A health savings account (HSA) is a tax-exempt trust or custodial account you set up with a qualified HSA trustee to pay or reimburse certain medical expenses you incur. You must be an eligible individual to qualify for an HSA. Health savings accounts are tax-advantaged medical savings accounts that you can draw money from for certain medical expenses. They work a bit like a 401k, but money is tax-free in and tax-free out. They are very useful in this respect as they can drop your MAGI, help you pay fewer taxes, and help you qualify for more assistance.

 

Why use an HSA in 2017?

No permission or authorization from the IRS is necessary to establish an HSA. You set up an HSA with a trustee. A qualified HSA trustee can be a bank, an insurance company, or anyone already approved by the IRS to be a trustee of individual retirement arrangements (IRAs) or Archer MSAs. The HSA can be established through a trustee that is different from your health plan provider. The IRS provided the inflation-adjusted HSA contribution limits effective for calendar year 2017, along with minimum deductible and maximum out-of-pocket expenses for the high-deductible health plans (HDHPs) that HSAs are coupled with.

 

Registering an HSA and Making an HSA

An HSA is always in an individual’s name. There are no joint HSAs, even when the HSA is linked to a family coverage HDHP and subject to the higher family coverage contribution limit. Some employer plans include an “employee plus one” tier in addition to self-only and family coverage. An “employee plus one”—such as an eligible employee and her dependent child—would fall under the HSA family coverage limits.

 

2017 HSA Contribution Limits

Health Savings Accounts (HSA) must be established by the tax filing deadline (without extensions) for the tax year in which your qualifying contribution(s) will apply. Any eligible individual can contribute to an HSA. For an employee’s HSA, the employee, the employee’s employer, or both may contribute to the employee’s HSA in the same year as long as the aggregate contributions are under the contribution limit. Family members (or any other person) may also make contributions on behalf of an eligible individual. Contributions must be made in cash.  Contributions of stock or other property are not allowed. HSAs can be funded with rollovers or transfers from an Archer MSA.

A one-time qualified HSA funding distribution may be made from your Traditional or Roth IRA to your HSA.  The maximum amount depends on your type of coverage (single or family).  The distribution is not included in your income, is not tax deductible, and reduces the amount you can contribute to your HSA.

 

2017 Annual HSA Contribution Limits

For calendar year 2017, the annual HSA contribution limits are:

  • Individuals (self-only coverage) – $3,400 (up $50 from 2016)
  • Family coverage – $6,750 (no change from 2016)

2017 HDHP Minimum Required Deductibles

For calendar year 2017, the High Deductible Health Plan (HDHP) required deductibles for an HSA are:

  • $1,300 for self-only coverage (no change from 2016)
  • $2,600 for family coverage (no change from 2016)

 

2017 HDHP Out-of-Pocket Maximum

The annual out-of-pocket expenses include deductibles, co-payments, and other amounts, but not premiums.

For calendar year 2017, the out-of-pocket maximums are:

  • $6,550 for self-only coverage (no change from 2016)
  • $13,100 for family coverage (no change from 2016)

If you use an HSA to pay for unqualified medical expenses, the tax penalty is 20 percent of the HSA distribution.

HSA Age 55 Catch Up Contribution

As in 401k and IRA contributions, you are allowed to contribute extra if you are above a certain age. If you are age 55 or older by the end of year, you can contribute additional $1,000 to your HSA. If you are married, and both of you are age 55, each of you can contribute additional $1,000.

 

What are the benefits of an HSA?

You may enjoy several benefits from having an HSA.

  • You can claim a tax deduction for contributions you, or someone other than your employer, make to your HSA even if you do not itemize your deductions on Form 1040.
  • Contributions to your HSA made by your employer (including contributions made through a cafeteria plan) may be excluded from your gross income.
  • The contributions remain in your account until you use them.
  • The interest or other earnings on the assets in the account are tax free.
  • Distributions may be tax free if you pay qualified medical expenses. See Qualified medical expenses , later.
  • An HSA is “portable.” It stays with you if you change employers or leave the work force.

Qualifying for an HSA

 To be an eligible individual and qualify for an HSA, you must meet the following requirements.
  • You must be covered under a high deductible health plan (HDHP), described later, on the first day of the month.
  • You have no other health coverage except what is permitted under Other health coverage , later.
  • You are not enrolled in Medicare.
  • You cannot be claimed as a dependent on someone else’s 2015 tax return.

 

Using HSA Funds in 2017

HSA’s aren’t “use it or lose it.” The money that you put in an HSA goes in tax-free. You can keep it, invest it, use it tax-free on medical expenses, withdraw funds from it at a fee, and roll it over into a retirement account when you are ready for Medicare. Only FSA’s, the kind of health savings account you get through your employer, are “use it or lose it.” Those under age 65 (unless totally and permanently disabled) who use HSA funds for nonqualified medical expenses face a penalty of 20 percent of the funds used for such expenses. Funds spent for nonqualified purposes are also subject to income tax.

Double Check ACA Information on Your Return

If you received an extension of time to file your 2015 federal tax return, you have until Oct. 17 to double check your return and information on it that is related to the Affordable Care Act. The health care law includes  the individual shared responsibility provision and the premium tax credit that may affect your return.

Many people already have minimum essential coverage. If this applies to you, you’ll simply report your coverage when you file your tax return by checking a box on your Form 1040, 1040A or 1040EZ.

Most taxpayers simply need to check a box on their tax return to indicate you had health coverage for all of 2015. For any month that you or anyone in your family did not have minimum essential coverage, you need to either claim or report a coverage exemption or make a shared responsibility payment when you file your tax return.

If you enrolled in health coverage through the Health Insurance Marketplace, you may be eligible for the premium tax credit. If you benefited from advance payments of the premium tax credit, you must file a federal income tax return to reconcile your advance credit payments, even if you’re otherwise not required to file.  Failing to file will prevent you from receiving advance credit payments in future years.

The Interactive Tax Assistant tool can help you determine if you qualify for an exemption, if you need to make a payment, or if you are eligible for the premium tax credit. Taxpayers can visit IRS.gov/aca for additional information on how the Affordable Care Act affects their return.

Remember that filing electronically is the easiest way to file a complete and accurate tax return. Electronic filing options include free Volunteer Assistance, IRS Free File, commercial software and professional assistance.

Before filing the 2015 return, be sure to make a copy and keep it and all supporting documents for a minimum of three years. Doing so will make it easier to fill out a 2016 return next year. In addition, you will often need the adjusted gross income amount from your 2015 return to properly e-file your 2016 return.

Maintain Eligibility for Advance Payments of the Premium Tax Credit

The IRS is sending letters to taxpayers who received advance payments of the premium tax credit in 2015, but who have not yet filed their tax return. You must file a tax return to reconcile any advance credit payments you received in 2015 and to maintain your eligibility for future premium assistance. If you do not file, you will not be eligible for advance payments of the premium tax credit in 2017.

If you receive Letter 5858 or 5862, you are being reminded to file your 2015 federal tax return along with Form 8962, Premium Tax Credit.  The letter encourages you to file within 30 days of the date of the letter to substantially increase your chances of avoiding a gap in receiving assistance with paying Marketplace health insurance coverage in 2017.

Here’s what you need to do if you received a 5858

  • Read your letter carefully.
  • Review the situation to see if you agree with the information in the letter.
  • Use the Form 1095-A that you received from your Marketplace to complete your return. If you need a copy of your Form 1095-A, log in to your HealthCare.gov or state Marketplace account or call your Marketplace call center.
  • File your 2015 tax return with Form 8962 as soon as possible, even if you don’t normally have to file.
  • If you have already filed your 2015 tax return with Form 8962, you can disregard the letter.

Here’s what you need to do if you received a 5862 letter:

  • Read your letter carefully.
  • Review the situation to see if you agree with the information in the letter.
  • Use the Form 1095-A that you received from your Marketplace to complete Form 8962. If you need a copy of your Form 1095-A, log in to your HealthCare.gov or state Marketplace account or call your Marketplace call center.
  • File your 2015 tax return with Form 8962 as soon as possible, even though you have an extension until October 17, 2016, to file.
  • If you have already filed your 2015 tax return with Form 8962, please disregard this letter.

Affordable Care Act – What to Expect when Filing Your 2015 Tax Return

Health Care Information Forms

Taxpayers who are preparing to file their 2015 tax returns may receive multiple health care information forms that they can use to complete their return. The forms are:

Depending upon your specific circumstances, the Health Insurance Marketplace, health coverage providers and certain employers may provide information forms to you early in 2016 to help you accurately report health coverage information for you, your spouse and any dependents when you file your individual income tax return in 2016.  Health coverage providers, employers and the Marketplace will also file these forms with the IRS.

If you are expecting to receive a Form 1095-A, you should wait to file your 2015 income tax return until you receive that form.  Some taxpayers may not receive a Form 1095-B or Form 1095-C by the time they are ready to file their 2015 tax return and it is not necessary to wait for Forms 1095-B or 1095-C in order to file. While the information on these forms may assist in preparing a return, they are not required. Individual taxpayers should file their returns as they normally would.

The deadline for the Marketplace to provide Form 1095-A is February 1, 2016.  The deadline for insurers, other coverage providers and certain employers to provide Forms 1095-B and 1095-C is March 31, 2016.

The IRS has posted a set of questions and answers that introduce the new Forms 1095-B and 1095-C.  The questions and answers explain who should expect to receive the forms, how they can be used, and how to file with or without the forms.

Individual Shared Responsibility Provision

The Affordable Care Act calls for all taxpayers to do at least one of three things:

Most taxpayers are in the first category and they will simply check a box on their return to indicate that everyone listed on the front of the return has qualifying health care coverage for the entire year. Some taxpayers will have to file a form, Form 8965, to claim an exemption from the requirement to have health care coverage.

Taxpayers who do not have qualifying health care coverage and who do not qualify for an exemption will need to make an individual shared responsibility payment when they file their tax returns. Some taxpayers will find that they qualify for an exemption for part of the year but must make a payment for another part of the year.  These taxpayers should pay close attention to guidance that covers their situation..

Find out if you must make a payment by using our interactive tool, Determine if you are Responsible for the Individual Shared Responsibility Payment.

Exemptions

Taxpayers who did not maintain coverage throughout the year and meet certain criteria may be eligible to obtain an exemption from coverage. How an individual obtains an exemption depends upon the type of exemption. Some exemptions can be obtained only from the Marketplace other exemptions are claimed only when you file your tax return, and yet others can be obtained from the Marketplace, or claimed when you file your tax return.

Claim or report coverage exemptions on Form 8965Health Coverage Exemptions, and file it with Form 1040, Form 1040A, and Form 1040EZ. Each of these forms can be filed electronically.

Individuals who are granted a coverage exemption from the Marketplace will receive a notice with a unique Exemption Certificate Number or ECN. Keep this notice with other important tax information and enter the ECN on Form 8965 in Part I, Marketplace-Granted Coverage Exemptions for Individuals. Individuals who applied for an exemption with the Marketplace but do not have an ECN may enter “PENDING” in Part I of Form 8965. An ECN is not required for exemptions claimed on your tax return.

To claim an exemption when you file your tax return, simply file Form 8965 with your Form 1040, Form 1040A, or Form 1040EZ. It is not necessary to call the IRS or to obtain the exemption in advance.

Payments

Individuals that need to make a shared responsibility payment can calculate the payment using a work sheet included in the instructions for Form 8965. Taxpayers that do not have coverage and have an income below the filing requirement threshold for their filing status are exempt and should not make a payment. It is not necessary to file a return solely to claim this exemption.

See the Calculating and Reporting the Payment page for more information.

Premium Tax Credit

Individuals who purchased coverage through the Health Insurance Marketplace may be allowed to take the premium tax credit. During the open enrollment application process for health coverage through the Marketplace, most individuals requested financial assistance. The Marketplace, using information individuals provided about their projected income, address, and family composition for the year, estimated the amount of the premium tax credit that they would be allowed on their tax return. Individuals then had an option to have advance payments of the premium tax credit paid directly to their insurer to lower their monthly premiums.

Individuals who chose to have advance credit payments sent to their insurer must file a federal income tax return, even if otherwise not required to file. Complete Form 8962Premium Tax Credit (PTC) to claim the premium tax credit and reconcile the advance credit payments with the premium tax credit allowed. If the amount is less than the actual premium tax credit, the taxpayer will get the difference as a higher refund or lower tax due. If the advance credit payments that were paid to their health care providers were more than the actual credit, they may need to pay the difference with their tax returns. The completed Form 8962 must be filed with the federal income tax return.

Those who enrolled in coverage through the Marketplace but didn’t get the benefit of advance credit payments during 2014 may claim the premium tax credit when they file their return. Individuals can complete Form 8962 to find out if they are allowed the premium tax credit. For more information about the premium tax credit, see our Premium Tax Credit page or use the interactive tool, Am I eligible to claim the Premium Tax Credit?.

Individuals who purchased coverage through the Health Insurance Marketplace should receive Form 1095-A, Health Insurance Marketplace Statement . This form provides information you will need when completing Form 8962. Taxpayers with questions about the information on Form 1095-A for 2014, or about receiving Form 1095-A for 2014, should contact your Marketplace directly. Individuals who have questions about how a Form 1095-A with incorrect information affects their taxes should see our Incorrect Forms 1095-A and the Premium Tax Credit questions and answers.

Free File and e-file help Simplify Tax Time

All taxpayers who are reporting coverage, claiming a health coverage exemption, making an individual shared responsibility payment, or claiming the premium tax credit should consider filing their tax return electronically. E-filing a tax return is the simplest way to file a complete and accurate tax return as it guides individuals through the process and does all the math for them.

Electronic Filing options include free Volunteer AssistanceIRS Free Filecommercial software andprofessional assistance.

Small Business Health Care Tax Credit Information

If you are a small employer, you might be eligible for the Small Business Health Care Tax Credit, which can make a difference for your business. A small employer is eligible for the credit if (a) it has fewer than 25 full-time equivalent employees, (b) the average annual wages of its employees are less than $50,000 (adjusted for inflation beginning in 2014), and (c) it pays a uniform percentage for all employees that is equal to at least 50% of the premium cost of employee-only insurance coverage. This can be a great health care tax credit.

 

To be eligible for the small business health care credit, you must:

  • have purchased coverage through the Small Business Health Options Program – also known as the SHOP marketplace
  • have fewer than 25 full-time equivalent employees
  • pay an average wage of less than $50,000 a year
  • pay at least half of employee health insurance premiums

For tax years beginning in 2014, information on business health care credit:

  • The maximum credit increases to 50 percent of premiums paid for small business employers and 35 percent of premiums paid for small tax-exempt employers.
  • To be eligible for the credit, you must pay premiums on behalf of employees enrolled in a qualified health plan offered through a Small Business Health Options Program  Marketplace or qualify for an exception to this requirement.
  • The credit is available to eligible employers for two consecutive taxable years.

Even if you are a small business employer who did not owe tax during the year, you can carry the credit back or forward to other tax years. Also, since the amount of the health insurance premium payments is more than the total credit, eligible small businesses can still claim a business expense deduction for the premiums in excess of the credit. That’s both a credit and a deduction for employee premium payments.

 

Small tax-exempt employers and ACA provisions

There is good news for small tax-exempt employers, too. The credit is refundable, so even if you have no taxable income, you may be eligible to receive the credit as a refund so long as it does not exceed your income tax withholding and Medicare tax liability. Refund payments issued to small tax-exempt employers claiming the refundable portion of credit are subject to sequestration.

Finally, you can benefit from the credit even if you forgot to claim it on your 2014 tax return; there’s still time to file an amended return. Generally, a claim for refund must be filed within three years from the time the return was filed or two years from the time the tax was paid, whichever of such periods expires later. For tax years 2010 through 2013, the maximum credit is 35 percent of premiums paid for small business employers and 25 percent of premiums paid for small tax-exempt employers such as charities.

 

Filing Form 8941

You must use Form 8941, Credit for Small Employer Health Insurance Premiums, to calculate the credit. For detailed information on filling out this form, see the instructions for Form 8941. If you are a small business, include the amount as part of the general business credit on your income tax return.

If you are a tax-exempt organization, include the amount on line 44f of the Form 990-T, Exempt Organization Business Income Tax Return. You must file the Form 990-T in order to claim the credit, even if you don’t ordinarily do so. The Small Business Health Care Tax Credit Estimator can help you determine if you might be eligible for the Small Business Health Care Tax Credit and how much credit you might receive. This tool provides you with an estimate for tax year 2014 and beyond. However, some figures used in determining the credit are indexed for inflation. Because of this, for future years, the estimator cannot provide a detailed estimate.

 

Find out how ACA affects Employers with fewer than 50 Employees

Most employers have fewer than 50 full-time employees or full-time equivalent employees and are therefore not subject to the Affordable Care Act’s employer shared responsibility provision.

If an employer has fewer than 50 full-time employees, including full-time equivalent employees, on average during the prior year, the employer is not an ALE for the current calendar year. Therefore, the employer is not subject to the employer shared responsibility provisions or the employer information reporting provisions for the current year. Employers with 50 or fewer employees can purchase health insurance coverage for its employees through the Small Business Health Options Program – better known as the SHOP Marketplace.

 

Calculating Small Business Health Care Tax Credit

Calculating the number of employees is especially important for employers that have close to 50 employees or whose workforce fluctuates throughout the year. To determine its workforce size for a year an employer adds its total number of full-time employees for each month of the prior calendar year to the total number of full-time equivalent employees for each calendar month of the prior calendar year, and divides that total number by 12.

 

Employers that have fewer than 25 full-time equivalent employees

Employers that have fewer than 25 full-time equivalent employees with average annual wages of less than $50,000 may be eligible for the small business health care tax credit if they cover at least 50 percent of their full-time employees’ premium costs and generally, after 2013, if they purchase coverage through the SHOP.

All employers, regardless of size, that provide self-insured health coverage must file an annual information return reporting certain information for individuals they cover. The first returns are due to be filed in 2016 for coverage provided during 2015.

2016 Health Insurance ACA Tax Filling Tips with Premium Credit

Health Coverage Reporting Requirement

It’s always a good idea to prepare early to file your federal income tax return. Like last year, certain provisions of the Affordable Care Act affect your federal income tax return when you file this year.
Here are two things you should know about the health care law’s coverage and reporting requirements that will help you get ready to file your tax return.

Qualifying ACA Health Insurance Coverage

The Affordable Care Act requires that you and each member of your family have qualifying health insurance coverage for each month of the year, qualify for an exemption from the coverage requirement, or make an individual shared responsibility payment when filing your federal income tax return. Most taxpayers will simply check a box on their tax return to indicate that each member of their family had qualifying health coverage for the whole year. No further action is required. Use the chart on IRS.gov/aca to find out if your insurance counts as qualifying coverage.

 

E-File ACA Tax Coverage

You or your tax professional should consider preparing and filing your tax return electronically. Using tax preparation software is the easiest way to file a complete and accurate tax return. There are a variety of electronic filing options, including free volunteer assistance, IRS Free File for taxpayers who qualify, commercial software, and professional assistance.

 

Health Coverage Exemptions and Payments

The Affordable Care Act requires you and your dependents to have health care coverage, an exemption from the coverage requirement, or make a shared responsibility payment for any month without coverage or an exemption with your return. This law will affect your federal income tax returnwhen you file this year.

Here are five things you should know about exemptions from the health care law’s coverage requirement and the individual shared responsibility payment that will help you get ready to file your tax return.

  • You may be eligible to claim an exemption from the requirement to have coverage and are not required to make a payment. If you qualify for an exemption, you will need to file Form 8965,Health Coverage Exemptions, with your tax return.  You can claim most exemptions when you file your tax return. However, you must apply for certain exemptions in advance through theHealth Care Insurance Marketplace,
  • If you receive an exemption through the Marketplace, you’ll receive an Exemption Certificate Number to include when you file your taxes. If you have applied for an exemption through the Marketplace and are still waiting for a response, you can put “pending” on your tax return where you would normally put your ECN.
  • You do not need to file a return solely to report your coverage or to claim a coverage exemption.

 

Not Filing a Tax Return and ACA

If you are not required to file a federal income tax return for a year because your gross income is below your return filing threshold, you are automatically exempt from the shared responsibility provision for that year and do not need to take any further action to secure an exemption.

  • If you file a tax return and   your income is below the filing threshold for your filing status, you should use Part II of Form 8965, Coverage Exemptions for Your Household Claimed on Your Return, to claim a coverage exemption. You should not make a shared responsibility payment if you are exempt from the coverage requirement because you have income below the filing threshold.
  • If you do not have qualifying coverage or an exemption for the year, you will need to make an individual shared responsibility payment for each month without coverage or an exemption when you file your return. Examples and information about figuring the payment are available on the IRS Calculating the Payment page

 

Premium Tax Credit and ACA

Under the Affordable Care Act, you may be eligible for the premium tax credit if you enrolled for health coverage through the Health Insurance Marketplace.

Here are three things you should know about the health care law’s premium tax credit that will help you get ready to file your tax return.

  • If you bought coverage through the Health Insurance Marketplace, you should receive Form 1095-AHealth Insurance Marketplace Statement from your Marketplace by early February. Save this form because it has important information needed to complete your tax return.

IRS Form 1095-B and Form 1095-C

If you also receive Form 1095-B or Form 1095-C, which are unrelated to the Marketplace, see ourquestions and answers for information about how these forms affect your tax return.

  • If you are expecting to receive Form 1095-A and you do not receive it by early February, contact the Marketplace where you purchased coverage. Do not contact the IRS because telephone assistors will not have access to this information.
  • If you benefited from advance payments of the premium tax credit, you must file a federal income tax return. You will need to reconcile those advance payments with the amount of premium tax credit you’re entitled based on your actual income. As a result, some people may see a smaller or larger tax refund or tax liability than they were expecting. When you file your return, you will use IRS Form 8962, Premium Tax Credit (PTC), to calculate your premium tax credit and reconcile the credit with any advance payments.

Health Coverage Tax Credit HCTC

The Health Coverage Tax Credit is a tax credit that pays 72.5% of qualified health insurance premiums for eligible individuals and their families. Instructions for claiming the HCTC for 2015. To claim the HCTC for 2015, file Form 8885, Health Coverage Tax Credit, with your 2015 income tax return. Follow the 2015 Instructions for Form 8885 to figure your HCTC.

 

Using Form 8885 to figure your Health Coverage Tax Credit HCTC

If you were an eligible trade adjustment assistance recipient, alternative TAA recipient, reemployment TAA recipient, Pension Benefit Guaranty Corporation pension payee, or a qualifying family member, you may be able to claim the Health Coverage Tax Credit for qualifying health insurance coverage during 2015 when you file your income tax return.

 

Changes to Form 8885 and Health Coverage Tax Credit for 2015

Important changes to the HCTC for 2015. Eligibility for the HCTC in 2015 is generally the same as before the credit was reauthorized in 2015. However, three major changes were made.

  • You must make an election to claim the HCTC for a month during which you were eligible for the HCTC. Once you elect to claim the HCTC, you can’t claim the premium tax credit for the same coverage in that month or in any subsequent months during the year in which you’re eligible to claim the HCTC. You may need to report an excess advance premium tax credit repayment on Form 8962, Premium Tax Credit, if advance payments of the premium tax credit were made for you, your spouse, or a dependent in 2015.
  • You may claim the HCTC for all qualified health plans offered through a Health Insurance Marketplace in addition to all plans that were previously qualified.
  • You no longer have to be enrolled in non-group (individual) coverage for at least 30 days before you became eligible for the HCTC in order for your coverage to be qualified health insurance for the HCTC.

 

Who can claim the Health Coverage Tax Credit?

You may only elect to take the HCTC if you are one of the following:

  • An eligible trade adjustment assistance (TAA) recipient, alternative (ATAA) recipient, reemployment (RTAA) recipient.
  • An eligible Pension Benefit Guaranty Corporation (PBGC) pension payee.
  • The family member of a TAA, ATAA, or RTAA recipient or PBGC pension payee who is deceased or who finalized a divorce with you.

You are not eligible if you could have been claimed as a dependent on another person’s federal income tax return.

Claiming Dependents on Form 8962

If you or anyone claimed on your federal income tax return received the benefit of advance payments of the premium tax credit in 2015, you must report the payments on Form 8962, Premium Tax Credit, and follow specific instructions to reconcile the advance payments. See the instructions for Form 8885 and Publication 974, Premium Tax Credit, for more information.

 

What health insurance plans qualify for the Health Coverage Tax Credit?

All plans that were previously qualified for the HCTC qualify for the HCTC through 2019.

  • For 2014 and 2015 only: qualified coverage includes qualified health plans offered through a federally facilitated or a state-based Health Insurance Marketplace.
  • For 2016 and beyond: Health Insurance Marketplace coverage will no longer be qualified coverage for the HCTC.

Be sure to review the Instructions for Form 8885 for information about qualified health insurance plans that are eligible for the HCTC in 2014, 2015 and 2016.

 

How do I Claims the HCTC for 2016?

You may only elect to take the HCTC if you are one of the following:

  • An eligible trade adjustment assistance (TAA) recipient, alternative TAA (ATAA) recipient, reemployment TAA (RTAA) recipient.
  • An eligible Pension Benefit Guaranty Corporation pension payee.
  • The family member of an eligible TAA, ATAA, or RTAA recipient or PBGC pension payee who is deceased or who finalized a divorce with you.

You are not eligible if you could have been claimed as a dependent on another person’s federal income tax return.

 

How do I claim HCTC for 2015?

File Form 8885, Health Coverage Tax Credit with your 2015 income tax return and elect HCTC when you file. Follow special instructions, for filing your tax return to elect HCTC. Attach documentation about your HCTC eligibility, that your 2015 health plan was qualified and that the premiums claimed for your 2015 coverage were paid.

Follow special instructions, if you or anyone claimed on your federal income tax return enrolled in 2015 Marketplace coverage and received the benefit of advance payments of the Premium Tax Credit in 2015. You must reconcile the advance payments on Form 8962, Premium Tax Credit. See the Questions and Answers and Instructions for Form 8885 for more information.

How do I claim HCTC for 2014?

File an amended tax return using Form 1040X and Form 8885, Health Coverage Tax Credit. Follow special instructions for amending your tax return to elect the HCTC.
Attach documentation that proves your HCTC eligibility, that your 2014 plan was qualified and that the premiums claimed for your 2014 coverage were paid. Claimed or reconciled the Premium Tax Credit in 2014? You must follow additional instructions to claim the HCTC. Refer to these Questions and Answers for more information.

 

The Trade Preferences Extension Act of 2015

The Trade Preferences Extension Act of 2015 (Public Law 114-27), enacted June 29, 2015, extended and modified the expired Health Coverage Tax Credit. Previously, those eligible for the HCTC could claim the credit against the premiums they paid for certain health insurance coverage through 2013.

The HCTC can now be claimed for coverage through 2019. The IRS continues to work with its partners, the Pension Benefit Guaranty Corporation, the Department of Labor and State Workforce Agencies to ensure that all eligible taxpayers receive this important credit.