This information applies to tax year 2018 and prior. The Tax Cuts and Jobs Act of 2017 repealed the Shared Responsibility Payment after tax year 2018, therefore taxpayers who don’t have coverage during 2019 or later do not need an exemption in order to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
- Coverage Exemptions which the taxpayer can claim if they qualify;
- Marketplace-Granted Coverage Exemptions> issued by a state exchange or the Federal Marketplace;
- Household Income Below Filing Threshold
- Gross Income Below Filing Threshold
Coverage Exemptions can be claimed for specific reasons when the taxpayer meets the eligibility requirements for claiming these exemptions. These exemptions are not granted by the Marketplace or by a state exchange. Rather, the taxpayer claims these exemptions on their tax return if they qualify for the exemption. Additionally, each individual on the tax return must qualify for a given Coverage Exemption.
Taxpayers can claim a coverage exemption for the following reasons:
Income below the return filing threshold — The taxpayer's gross income or their household income is less than their applicable minimum threshold for filing a tax return. TaxSlayer Pro will automatically calculate this exemption and apply it to the return if applicable. For more information on this exemption, see www.healthcare.gov/exemptions. Also see Filing and Income Threshold Exemptions for information on how this exemption is determined on the taxpayer's tax return.
Coverage is considered unaffordable — The minimum amount the taxpayer would have paid for premiums is more than 8.05% of their household income. To ensure they qualify for this exemption, the taxpayer should complete the Affordability Worksheet contained in the Instructions for Form 8965.
Short coverage gap — The taxpayer went without coverage for less than 3 consecutive months during the year. Get more information on claiming this exemption at www.healthcare.gov/exemptions.
Citizens living abroad and certain non-citizens — The taxpayer was:
- A U.S. citizen or a resident alien who was physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months;
- A U.S. citizen who was a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year;
- A bona fide resident of a U.S. territory;
- A resident alien who was a citizen or national of a foreign country with which the U.S. has an income tax treaty with a non discrimination clause, and you were a bona fide resident of a foreign country for an uninterrupted period that includes an entire tax year; Not lawfully present in the U.S and not a U.S. citizen or U.S. national. For more information about who is treated as lawfully present in the U.S. for purposes of this coverage exemption, visit HealthCare.gov; or
- A non resident alien, including
- a dual status alien in the first year of U.S. residency, and
- a non resident alien or dual status alien who elects to file a joint return with a U.S. spouse.
Members of a health care sharing ministry — The taxpayer was a member of a health care sharing ministry.
Members of Indian tribes — The taxpayer was either a member of a Federally recognized Indian tribe, including an Alaska Native Claims Settlement Act (ANCSA) Corporation Shareholder (regional or village), or you were otherwise eligible for services through an Indian health care provider or the Indian Health Service. Get more information on claiming this exemption at www.healthcare.gov/exemptions.
Incarceration — The taxpayer was in a jail, prison, or similar penal institution or correctional facility after the disposition of charges. Get more information on claiming this exemption at www.healthcare.gov/exemptions.
Aggregate self-only coverage considered unaffordable — Two or more family members' aggregate cost of self only employer sponsored coverage was more than 8.05% of household income, as was the cost of any available employer sponsored coverage for the entire family.
Resident of a state that did not expand Medicaid — The taxpayer’s household income was below 138% of the federal poverty line for their family size and at any time in 2018 they resided in a state that didn't participate in the Medicaid expansion under the Affordable Care Act. Get more information on claiming this exemption at www.healthcare.gov/exemptions.
General hardship — The taxpayer experienced a hardship preventing them from obtaining coverage under a qualified health plan. General hardships include, but aren't limited to, the following:
- Being homeless;
- Being evicted or facing eviction or foreclosure;
- Receiving a shut-off notice from a utility company;
- Experiencing domestic violence;
- Experiencing the death of a close family member;
- Experiencing a fire, flood, or other natural or human-caused disaster that caused substantial damage to property;
- Filing for bankruptcy;
- Having medical expenses that could not be paid;
- Experiencing unexpected increases in necessary expenses due to caring for an ill, disabled, or aging family member;
- Having a child that was denied Medicaid and CHIP, and another person is required by court order to provide coverage to the child;
- Being without coverage while awaiting an appeals decision from the Marketplace;
- Being determined ineligible for Medicaid in a state that did not expand Medicaid coverage.
Member of tax household born, adopted, or died — During the tax year a child was added to the tax household by birth or adoption, or a member of the tax household died during the year.
To enter a 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 the individual that has the exemption.
Select the applicable exemption type from the list provided, and click Ok.
Click the check box next to each month for which the Coverage Exemption applies. To claim the exemption for the entire year, click Check All.
Repeat this process for each person on the tax return who is claiming a Coverage Exemption.
NOTE: This is a guide on entering Coverage Exemptions into the TaxSlayer Pro program. This is not intended as tax advice.
Publication 519 - U.S. Tax Guide for Aliens
Healthcare.Gov - Find health care coverage exemptions that work for you
Publication 5187 - Affordable Care Act: What You and Your Family Need to Know