Beginning with the 2019 tax year (for which tax returns are filed in 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 tax year 2019 or later neither will be penalized nor needs to claim an exemption to avoid the penalty.
Form 8965, Health Coverage Exemptions was retired after tax year 2018. The information that follows is for tax years prior to 2019.
Short coverage gap (code "B"). A taxpayer generally can claim a coverage exemption for the taxpayer or another member of the tax household for each month of a gap in coverage of less than 3 consecutive months. If an individual had more than one short coverage gap during the year, the individual is exempt only for the month(s) in the first gap. If an individual had a gap of 3 months or more, the individual isn't exempt for any of those months. For example, if an individual had coverage for every month in the year except February and March, the individual is exempt for those 2 months. However, if an individual had coverage for every month in the year except February, March, and April, the individual isn't exempt for any of those months.
Example: Multiple gaps in coverage. The taxpayer had coverage for every month except February, March, October, and November. The taxpayer is eligible for the short coverage gap exemption only for February and March.
Example: Gaps in coverage for partial months. The taxpayer has minimum essential coverage except for the period April 5 through July 25. An individual is treated as having coverage for any month in which he or she has coverage for at least 1 day of the month. As a result, the taxpayer has minimum essential coverage in April and July and is eligible for the short coverage gap exemption for May and June.
Example: Continuous coverage gap straddles more than one taxable year. If the taxpayer does not have minimum essential coverage for a continuous period that begins in one taxable year and ends in the next, for purposes of applying the short coverage gap rules to the first taxable year, the months in the second taxable year included in the continuous period are not counted. For purposes of applying the short coverage gap rules to the second year, the months in the first taxable year are counted.
To enter a short-term coverage exemption in TaxSlayer Pro, from the Main Menu of the tax return (Form 1040) select:
- Other Taxes
- Health Coverage Exemptions/Responsibility Payment (8965)
- Part III – Coverage Exemptions - Select New, then select the individual that has the exemption.
- Exemption Type - Select Short coverage gap (code "B").
- Months Claiming Exemption - Select the month(s) to which the exemption applies.
This process should be repeated for each person on the tax return who is claiming a short-term coverage exemption.
Note: This is a guide on entering a Short Term Coverage Exemption into the TaxSlayer Pro program. This is not intended as tax advice.
Additional Information:
IRS: Affordable Care Act: What You and Your Family Need to Know