Thanks to Obama Care, health care and taxes have a new relationship this year. As a result of the Affordable Care Act, for the first time in history, tax forms require everyone to report their health insurance status.
Since most people get their insurance through their jobs, the change will be pretty simple for those filers. If that describes you, then you will just check a box on line 61 of your tax form. However, if you bought insurance through a state or federal exchange or did not have health insurance in 2014, the situation is more complicated.
Here are the significant tax-related changes you will need to know before you file your 2014 tax return:
Health Insurance Premium Tax Credit
Premium tax credits, also known as health care subsidies, are based on income. If you qualified in 2014, you had the option of receiving the credit in advance, with the payment going directly to the insurer to lower the cost of monthly premiums. Otherwise, the full credit can be claimed when filing the annual tax return. Here's the catch, though: If you underestimated your 2014 income and received a larger subsidy than you were eligible for, you will have to pay it back.
New Tax Reporting Documents
- Those who bought health insurance through an exchange and received a premium tax credit will get Form 1095-A in the mail by the end of January. This will show how much advance premium tax credit the government paid to your health plan on your behalf during the year.
- You will complete Form 8962 to find out if the credit you received matches your final income and household size – you may get more money or owe some. You’ll need this when you file taxes, so keep it with your other tax-related documents.
- If you received a premium tax credit, you would have to use either Form 1040A or the long Form 1040.
Penalty for Being Uninsured
If you didn’t have health insurance in 2014, you might owe a penalty. The penalty for 2014 is the greater of $ 95 per person ($ 47.50 per child) or 1% of your taxable income. This penalty will be subtracted from your refund. If you aren’t eligible for a refund, you will be billed for the amount owed.
Exemptions to The Requirement
Millions of people will qualify for an exemption from the requirement to have health insurance. Financial hardship and membership in certain religious groups are among the types of exemptions available. For a complete list of reasons you might qualify, go to Healthcare.gov. If you are in DC, go to DCHealthLink.com
Finally, remember that there are tax preparation services available and ready to assist everyone in making sense of the new requirements.
Washington DC tax preparation firm, Charles P Myrick CPA is here to assist if you want help applying for an exemption handling the additional challenges in filing your 2014 tax return. Contact us today.