For the 2018 tax year and prior, most taxpayers must have minimum essential health coverage or pay the Shared Responsibility Payment (sometimes called the penalty or mandate) for the months in which they did not have health insurance. If a taxpayer qualifies for a health coverage exemption, he or she does not have to pay the penalty.
Beginning with the 2019 tax year (for which tax returns are filed in early 2020), the penalty no longer applies. A taxpayer who does not have health coverage in 2019 or later, does not need an exemption to avoid the penalty.
Under the Affordable Care Act, there are four types of exemptions that an individual can claim to avoid the Shared Responsibility Payment.
These exemptions are:
- Marketplace Granted Coverage Exemptions, issued only by a state exchange or the Federal Marketplace. See Marketplace-Granted Coverage Exemptions;
- Coverage exemptions which the taxpayer elects if they meet certain qualifying conditions;
- Household income below filing threshold;
- Gross income below filing threshold.
All exemptions are reported on the tax return, although the taxpayer is automatically exempt if he or she does not have to file a return because their income is below their filing threshold.