Beginning with the 2019 tax year (for which tax returns are filed in early 2020), the Shared Responsibility Payment or penalty for not having minimum essential health coverage no longer applies. As a result, a taxpayer who does not have health coverage in 2019 or later, does not need an exemption to avoid the penalty and Marketplace Exemptions do not apply for tax years after 2018. Form 8965 - Health Coverage Exemptions was retired as a tax form starting in 2019.
The following information is for tax years 2014 through 2018.
Under the Affordable Care Act, there were four types of exemptions that an individual could claim to avoid the Shared Responsibility Payment. These exemptions are
- Marketplace–Granted Coverage Exemptions, issued by a state exchange or the Federal Marketplace
- Coverage Exemptions which the taxpayer claims if they qualify
- Household Income Below Filing Threshold
- Gross Income Below Filing Threshold
Marketplace-Granted Coverage Exemptions were for specified reasons and the taxpayer must have applied for the exemption with the Marketplace or state exchange. Each individual on the tax return is treated separately and each person on the tax return must apply for a Marketplace-Coverage Exemption. When the exemption is approved by the federal Marketplace or state exchange, the taxpayer is issued a 5-, 6-, or 7-digit Exemption Certificate Number, which will be entered in Part I of Form 8965 in their tax return. If their application for the exemption has not been determined yet, they can submit their return with PENDING instead of a number.
Coverage Exemptions granted by the marketplace include the following:
- Members of Health Care Sharing Ministries
- Members of Indian Tribes
- Members of certain religious sects
- Being ineligible for Medicaid in a state that does not expand Medicaid coverage
- General Hardship
- Coverage Being Deemed Unaffordable
- Enrolled in a Medicaid plan that does not meet the minimum coverage requirements
To enter a Marketplace-Granted Coverage Exemption, from the Main Menu of the Tax Return (Form 1040) select:
- Other Taxes Menu
- Health Coverage Exemptions / Responsibility Payment (8965)
- Part I – Marketplace Granted Coverage Exemptions
Select New and double-click on the individual that has the exemption.
Select Exemption Certificate Number and key in the number provided by the Marketplace. If the exemption certificate number is five or six digits, you should add zeros to the beginning to make it a seven-digit number. After entering the number, click Ok or press Enter.
Select Months Granted Exemption and select each month to which the Marketplace-Granted Exemption applies.
This process should be repeated for each person on the tax return who has been granted a Marketplace Granted Coverage Exemption.
NOTE: This is a guide on entering Marketplace-Granted Coverage Exemptions into the TaxSlayer Pro program. This is not intended as tax advice.
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Publication 5187 Affordable Care Act: What You and Your Family Need to Know