Health Care Reform and Your Taxes

Health Care

Lately you may be hearing buzz about health care reform, Affordable Care Act, or Obamacare on the news.

These are the unofficial names for The Patient Protection and Affordable Care Act, a national health care plan signed into law by President Obama that aims to provide the majority of Americans with access to affordable health care.

Not sure what this new health care law is or if it changes anything for you and your family?  Don’t worry, TurboTax has you covered.

Here are the facts straight from our experts.

  • The Affordable Care Act requires that all Americans (with a few exceptions) have health insurance starting in 2014.
  • If you have health insurance, you’re all set.  80% of Americans already have health insurance through their employer, Medicaid, Medicare, or individual insurance and are already in compliance with the new law.  If you fall into this bucket, you don’t need to do anything.  You’re all set.
  • If you’re uninsured, you can shop for health insurance in the online Health Insurance Marketplace.  The Marketplace, which opens October 1, 2013, helps you compare your health insurance coverage options and costs.  You have until March 31, 2014 to purchase health insurance through the marketplace.  If you choose not to, you could face a health care tax penalty on your 2014 tax return (the one you file in 2015).
  • You may be eligible for financial assistance to help cover insurance cost.  If you purchase your health insurance through the online health insurance marketplace or exchange, you may be eligible for a government subsidy in the form of a tax credit.  Unlike most tax credits, you will not have to wait to receive the tax credit or subsidy; it will be applied to your insurance in 2014 when your coverage begins.
  • When it comes to the new health care law, TurboTax has you covered.  The requirement to purchase health insurance does NOT impact your 2013 tax return (the one you file in 2014).  TurboTax is up to date with all the latest tax and health care laws so you can be confident that your taxes are done right with TurboTax. 

Still have questions about how the new health care law impacts you and your family? TurboTax AnswerXchange will give you answers to your personal healthcare questions.

Just answer a few simple questions and it will tell you how the new law impacts you and whether you’re eligible for financial assistance, so that you can make the best choice for your health care needs and budget.

To find out more about the Affordable Care Act, or Obamacare,  you can also watch our video.

Comments (1,020) Leave your comment

  1. if granted exemption can i go ahead and tick the full coverage box on line 61? As said before my husband has full coverage and I have exemption based on the fact that I had no coverage in 2014 for the months leading to enrollment and I enrolled before May 2014.

  2. My husband has Medicare benefits and so did not have to apply in the affordable healthcare plan. I am under 65 and had no coverage . In 2014, I applied for a health care plan in the Marketplace and paid the first premium in April so my insurance started May 1, 2014. WHen filing taxes, I was asked to pay a penalty 0f $413. But I checked the Affordable Care Act and found that since I was without coverage in 2014 only in the months prior to enrolling in coverage that was effective before May 2014, I could apply for an exemption and I had to complete part III in form 8965. My accountant submitted the form but I still have to pay the $431. Why is that ? I do not know whether I am missing some thing somewhere.

    1. Hi Pearl,
      Yes you can qualify for an exemption if you are uninsured for under 3 consecutive months. Since the deadline for 2014 enrollment was March 31, 2014 it looks like you should get the exemption. TurboTax automatically fills out the forms for you and gives you the exemption if you are eligible when you prepare your taxes with TurboTax. Here’s more information on exemptions http://blog.turbotax.intuit.com/2014/12/30/6-top-affordable-care-act-exemptions/
      Thank you,
      Lisa Greene-Lewis

  3. I signed up for health insurance through the marketplace in March of 2014 because with my income I qualified for a tax credit to help cover the cost. In October 2014 I cancelled through the marketplace because I secured employment with my a new employer that provided health insurance. In late November and early December I received two bonuses from a company that had laid me off in 2013 and they were now completely closed (reason we received bonuses). I was going through process of filing my income tax and completed the 1095 form for the tax credit and my refund went from 2600 to 300 because now the government wants me to pay back the credit I received. I’m confused? How could they expect me to pay back the credit? When I was getting the credit I wasn’t making enough money to pay the full premium. When I got a better job, I immediately cancelled the marketplace coverage because my employer offered me coverage. And the bonus came after I had cancelled the coverage through the marketplace.

    1. Jlynn,
      The premium tax credit is based on annual income, not monthly income, so the credit you received based on your income before the new job and the bonuses is being recalculated.

      Mary Ellen

  4. I was off work last year for 6 weeks and had to pay for my own healthcare out of my pocket and was wondering if that would be tax deductible ?

  5. I want to claim my friend as a dependent. He has no income and no health insurance. I have health insurance thru my employer, do I have to pay a penalty because he did not have health insurance or would he qualify for a exemption because of the income threshold and if so how do I report that on my tax return?

    1. Sue,

      If you claim your friend as a dependent, he is considered a member of your household and you would be responsible for the penalty if he is not insured and does not qualify for an exemption. He would need to include your income in applying for coverage on the exchange.

      Mary Ellen

  6. I support an adult child who does not live with me. They do not have insurance. Will this affect me If I claim them on my taxes?

    1. Jen Bo,
      If you claim someone as a dependent on your tax return, they are a member of your household for purposes of the ADA and you would receive the penalty if a member of your household is not covered by insurance.

      Mary Ellen

  7. My husband and I are separated and have been for many years. However; he is military and the children and I are covered under tricare. Are there any forms that I need for filing my taxes for healthcare. How does affect our taxes as we both file head of household? (We were advised that was legal as we both maintain different households and have only remained married for the health care.)

    1. As long as you do not live together, and you each provide the home for a qualifying child, you can both file as head of household, and not married filing separately. You will only need to provide the information that you and your dependents are covered by employer-provided insurance.

  8. Does a dependent need to claim the market place tax credit when filing a tax return? Or just the head of household?

    Thank you.

    1. Beck,
      The head of household, or the person claiming the dependent, is the one required to ensure that all the members of their household are covered and they will claim the premium tax credit on their return when they file. The dependent will not need to report anything on their separately filed tax return.

  9. I signed up with Healthcare.gov at the beginning, Alaska does not have a state exchange. We are self-employed (wife and myself, no one else in household), run a business that is intertwined with our personal taxes. Our income on paper varies a lot year to year, depending upon depreciation and business projects/write-offs, and has gone above and below the $77,000 cut-off for tax credits for a couple in Alaska. For upcoming year, we need to provide income varification, and I don’t have any of what is listed by the exchange as documentation they accept. What’s the best way/best paperwork to submit to show income, but also indicate that upcoming year may vary a lot? We do not collect paychecks, just work the business. Also, if we went over for 2014, will we need to pay all of the credits back? If so, that makes our health insurance back to unaffordable, the cost would be 25% of our net income.

    1. Jon,

      You can use your income tax return to verify your income, although it doesn’t show the monthly fluctuations. And you could add a schedule of your self-employment income for the last several years to show the annual fluctuation.

      If your income exceeds 400% of the poverty level for your family and state, you will have to repay any advance premium tax credit you received. You can use the cost of the insurance exceeding 8% of your income to request an exemption for 2015.

      Mary Ellen

  10. If you as a married filing jointly made 1900 but your spouse made much more, do you have to add your income to the total. I always assumed that if it was under 3000-5000 it did not need to be added

    1. Theresaa,
      All income, no matter how small, is supposed to be reported unless it meets certain tax rules for being tax free, like insurance pay-outs, or some social security benefits. Your $1,900 of income should be reported on your joint tax return and will be considered as part of your household income in determining eligibility for premium tax credits.

      Mary Ellen

  11. Under the state section it offers an area on turbo tax where you can enter medical insurance premiums…see pasted example….Enter Any Health Insurance Premiums
    Enter the total, if any, you paid in 2014 for all qualified long-term care insurance premiums and health insurance premiums. Do not include self-employed health insurance premiums or Medicare premiums.
    My question is I have marketplace insurance because I am not married and my employer does not offer insurance. I took a monthly advance payment, but still had to pay 709.56 out of pocket to pay for the premium? Do I put this 709.56 in the state section or not? I noticed in the federal portion is said do not list marketplace info under the medical expenses section. Thank you for your time.

    1. Beth,

      Yes, you would put your out of pocket premium in the state section. The marketplace info they mention in the federal portion is who your provider is and information of that nature, not the premiums paid.

      Mary Ellen

  12. What happens if filing married jointly and the main income earner has no insurance but the second and children do? We can’t file seperate because we won’t get the child tax credit if seperate.

    1. Hi Jeni,
      There will be a penalty on the one person without insurance, but not on the others, unless there is an exemption for the one without insurance. TurboTax will help you through all the appropriate forms and questions to calculate the right amount of penalty.

      Mary Ellen

  13. My husband and i had health insurance together all last year . We received the subsidy from the affordable care act. We normally file seperate. How can we file”besides joint”, that neither of us will be penalized.

    1. Evely,
      If you were covered all year, you won’t have penalties for non-coverage.
      If you live together all year, then filing jointly is the only way to qualify for subsidies. If you are not going to file a joint return, you should not request advance premium tax credits in the future.

      Mary Ellen

      1. And what happens when the Supreme Court later this year rules that the wording of the law really is the wording of the law and disallows the subsidies in the 30+ states that did not set up their own exchanges ?

  14. i have a live-in lady friend who has no income and is completely dependent on me. she has several mental conditions that make it impossible to work. she has many outstanding medical bills that she has no means to pay. in the stste of tn. she has been denied any coverage thru medicaid. i also pay for her doctors. office visits and her medications. she filed for disability in october 2013 with ssa and has been denied several times. her claim is under appeal and she is waiting on a hearing with an ssa judge i also have two adult sons that are not working and are completely dependent on me. i’m 74 and i get my ssa benefits and also have to work full time to make ends meet. i have medicare and a supplemental policy for my self, no coverage thru my employer. i will be claiming them all as dependents, as they were dependent on me the entire year. when i file my return will i be taxed for the fact that they have no health coverage?

    1. John,
      You are responsible for seeing that everyone in your household is covered by insurance, and by claiming your sons and lady friend a dependents, they are part of your household. You will be penalized for anyone who doesn’t have coverage when you file your tax return, unless they qualify for one or more of the exclusions.
      You can learn more about the exclusions at http://blog.turbotax.intuit.com/2014/06/03/who-qualifies-for-a-penalty-exemption-under-the-affordable-care-act/

      Mary Ellen

  15. I had health insurance as of may 1rst which I was told I would be good and not have to pay any penalties’. I recently tried doing my taxes online at turbo tax. When I entered my health care coverage. It took $500 + from my refund therefore I did not file them. I am really thinking about doing my taxes elsewhere because I cant take that big of a hit. Why is it penalizing me?

    1. Mark,
      Be sure you go through the exemptions to the penalty section. You could have a small penalty. Are you having to repay some of the advanced premium credit because your income is higher than you projected when you applied for the credit last year?

      Mary Ellen

  16. The ACA law says the penalty for no insurance can only be taken from excess withholding. I will have no excess withholding. Will I still owe and have to pay the penalty?

    1. Greg,
      Although they cannot enforce the collection of the penalty, it will remain as a liability on your account, and in the event you ever have a refund due in the future, not just from withholding, but from estimated tax payments as well, they will apply that refund to the liability.

  17. how will 1099-R forms affect the subsidy? I may be facing a situation to cover my children’s education costs, healthcare premiums, and save my home from potential foreclosure and will need to withdraw from my 401k to stay afloat. will that count as income and cause even more penalties and fines by the government just to keep my head above water next year (2015)?

    1. In my experience, any monies received from a 401k is counted towards your gross income and will be taxed. Depending on the servicer, you may opt to have taxes taken out when you cash out. The servicer will send you a form to file with your taxes that indicates how much has been taken out and any taxes withheld. If you use turbo tax, it is easy to add all the information in and calculate everything accurately. I had to do this in 2013. (401k’s are not taxed when contributed, but are taxed when cashed out).

  18. I am married and covered by insurance at work. My husband has no income and does not have insurance. If he gets the so-called affordable care, does my income count as his?

  19. If I have medical insurance but I do not have dental insurance (pediatric dental) will I be subject to a penalty when I file my taxes for not having pediatric dental?

    Thanks

  20. My employer only pays 50% of the group premium. In lieu of a salary increase they want to add the additional 50% to my gross wages and then deduct it pre tax to pay my share. What are the advantages to me rather than them just paying the 100% and not run it thru my payroll check.

    1. Hi Helen,
      It sounds to me as though your employer currently pays 50% of your premium and you pay the remaining 50% as a payroll deduction. So if you are making $500/week and your share of the premium is $25/week, you have all your payroll taxes withheld on $500, and then the $25 premium is deducted. If your employer wants to add the additional 50% as wages and then deduct pre-tax, your gross wages will be $525, your premium will be deducted, then your payroll taxes withheld will still be based on $500 wages. Under your current plan, if the taxes are $50, you would take home $425. Under the new plan, you would take home $450.

      Thank you,
      Mary Ellen

  21. Hi Turbo TaxLisa,
    Is the amount that I receive from the tax credit subsidy considered Taxable Income in the state of PA.?
    Thank you,
    Geoff

      1. I have posted numerous questions over the last couple of months to which I have received no answers. I have no idea whether the folks at TurboTax monitor this blog or not. If so, then they are just very picky about what they want to answer.

  22. We receive the affordable health care tax credit for low income earners. If we file our taxes late what effect will this have on us receiving the tax credit?

    1. Hi Gideon,
      If you receive an advance premium tax credit or are eligible to claim the tax credit on your taxes that you received in 2014 on your 2015 taxes then you would have to file your taxes. In addition, anyone that has a tax filing requirement for example income over $10,000 if single and $20,000 if married filing jointly has to file their taxes in order to receive the credit.
      Thank you,
      Lisa Greene-Lewis

  23. If you receive a tax credit that pays for your health ins each month under obamacare does that mean I will no longer receive my tax return ?

    1. Janice,
      When you prepare your 2014 tax return next year, you will calculate the exact amount of subsidy you are entitled to. If the subsidy you actually applied to your premiums is more than the subsidy calculated, the difference can reduce your refund. If your calculated subsidy is more than you received, you will increase your refund.

      1. Hello. I just do not understand. I am self employed and for 2014 I average a little over 14,000 for my business due to the fact that I did not open and operate until the 4th or th month lastyear. I recently signed up on the market place and I was approved for a tax credit of $239.oo for a family of 3. The qualification for a family of 3 is 19,000 and above. Will I be penalized if I make less than 19,ooo.

  24. For tax year 2014, if I am self employed and purchase a policy through the marketplace paying 100% of the premium, can I deducted the premium as an expense on my taxes in 2014? Currently in 2013 if I am paying 100% of my premiums and show a profit, these premiums are deductible to reduce my income. I can not find anything that answers this question for me.

    1. Hi Michelle,
      The Self-employed health insurance deduction is still available. If you receive a subsidy from the marketplace, you will need to reduce your deduction by the amount of the subsidy.

  25. My only income is from social security disability but I have only been on it for one year and can’t get medicare until I have been on ssd for two years . The ssd is not taxable income .I make $1200a month on ssd and can’t afford to pay the premium on the healthcare and still pay my bills and utilities .the healthcare marketplace said I could not get a tax credit discount ,I make just over the limit for medicaid in my state of tn.This affordble healthcare is not affordable at all.

  26. Hello,
    My wife and I now receive medical benefits under the affordable care act. My question is that we cannot file tax returns “married filing jointly”, and must file “married filing separately” due to the fact that my refund is always kept by the federal government due to a large legal debt that I incurred long before our marriage. Does the ACA demand that we file jointly in CA, or can we still file “married filing separately” without losing the medical benefits? I am not concerned with paying higher taxes, but I am very concerned about affecting my wife financially. I don’t want to file an innocent spouse claim after the fact, as I just don’t want to effect her with this.

    1. File 8379 Injured spouse with your federal tax return and you can file together and it wont affect her portion at all.

    2. Chris,
      If you file Married, Filing Separately, you will not quality for any of the premium tax credits available.

      Mary Ellen

    3. File the injured spouse at the same time as your taxes. You don’t have to wait after the fact. Although CA will still take a portion but not all of what you owe because its a state that does that. I cant remember exactly why or what it officially is called. But it is what happened to us last year.

  27. My husband and I are at about 300% poverty level. I m not insured, my husband will start medicare from june. Our adult son is unemployed, files his own tax return, and is depended on us, and is covered under medicaid. If we include him as dependent on our tax return, will he loose his medicaid coverage ? And if we include him in our tax return, it will bring our income below 250%, will i be eligble for medicaid or any other subsidy ? Thank you.

  28. I make $32,000 a year. After taxes it figures out to about $1900 a month. By the time I pay rent, food, car insurance, water, electric, gas heat, gas car…. I barely have $250 left over. How am I supposed to pay $325 a month for insurance, what happens if my car breaks down. I’m being asked to pay over 15% of my take home pay for insurance, that has a hefty $2500 I have to pay before the insurance actually starts paying for anything. Thats all add’s up to nearly 25% of my take home pay. How is this considered Affordable? I see who its affordable for, not me thats for sure. I suppose Obama wants me to eat Ramen for breakfast lunch dinner. Tell the truth Lisa, or are you afraid to tell people the real truth and the real math.

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