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. Coverage Exemptions do not apply for tax years after 2018.
The information that follows is for tax years before 2019.
A coverage exemption when coverage is deemed unaffordable (code "A") can be claimed for a taxpayer or another member of the taxpayer's tax household for any month in which:
- The individual is eligible for coverage under an employer plan and that coverage is considered unaffordable, or
- The individual is not eligible for coverage under an employer plan and the coverage available for that individual through the Marketplace is considered unaffordable.
To determine whether this unaffordable coverage exemption applies to a taxpayer or another member of the tax household for one or more months of the year, the Affordability Worksheet contained in the Instructions for Form 8965 should be completed before claiming this coverage exemption. Generally, coverage is considered unaffordable in 2017 if the individual's 'required contribution' is more than 8.16% (8.13% in 2016 and 8.05% in 2015) of their household income.
If the taxpayer or another member of the tax household is eligible for coverage under an employer plan, the required contribution is the amount he or she would pay for the lowest cost coverage in which he or she can enroll. For this purpose, the amount the employee would pay includes an amount that may be paid through a salary reduction arrangement. If other family members are eligible for employer coverage the required contribution is the amount the employee would pay for the lowest cost family coverage that would cover everyone in the tax household for whom a personal exemption deduction is claimed on the tax return who is eligible for the coverage and doesn't qualify for another coverage exemption. For this purpose, the amount the employee would pay includes amounts that may be paid through a salary reduction arrangement.
If the taxpayer or another member of your tax household is not eligible for coverage under an employer plan the required contribution is based on the premium for the lowest cost bronze plan available through the Marketplace minus the maximum premium tax credit that the taxpayer could have claimed if the individuals had enrolled in this plan. For this purpose, the lowest cost bronze plan available through the Marketplace is used that covers everyone in the tax household for whom a personal exemption deduction is claimed on the tax return, who isn't eligible for employer coverage, and who doesn't qualify for another coverage exemption. For information on the applicable lowest cost bronze plan the taxpayer could have purchased for their tax household, contact the Marketplace.
To enter an Unaffordable Coverage Exemption, from the Main Menu of the Tax Return (Form 1040) select:
- Other Taxes Menu
- Health Coverage Exemptions/Responsibility Payment (8965)
- Part III –Coverage Exemptions
- Select 'New' and double-click on the individual that has the exemption.
- Select ‘Exemption Type' and then select Unaffordable (code "A") from the list provided and select enter.
- Select ‘Months Claiming Exemption’ and select the month(s) that the Unaffordable Coverage Exemption applies.
- This process should be repeated for each person on the tax return who is claiming a Unaffordable Coverage Exemption.
NOTE: This is a guide on entering the Unaffordable Coverage Exemptions into the TaxSlayer Pro program. This is not intended as tax advice.