Who Qualifies for a Penalty Exemption Under the Affordable Care Act?

Are you unsure if you need to sign up for health insurance? Don’t worry, TurboTax has you covered and can help you understand who is exempt from having insurance under the Affordable Care Act.

The Affordable Care Act requires that all Americans have health insurance starting in 2014. Those who choose to not have insurance will have to pay a tax penalty unless they qualify for an exemption.

The tax penalty can also be called an “individual responsibility payment.”

The tax penalty is based on family size and income. For 2014, the fee is $95 per adult or one percent of your total yearly income depending on your income and is paid when you file your 2014 federal tax return (the one you file in 2015).

The annual fee will increase each year, and the TurboTax penalty calculator can help you estimate what you might owe. If you go without coverage for only part of the year, you’ll pay a partial fee; if you’re uninsured for less than three consecutive months, you won’t have to pay a fee at all.

But for some Americans who do not already have insurance through their employer, their parents, Medicaid, Medicare, TRICARE, the Veterans health care program, or individual insurance – you may be exempt.

The Affordable Care Act exemptions cover a variety of people, like followers of particular religious groups, members of Native American tribes, and people who do not meet the minimum income requirement, for which health care coverage would be considered unaffordable.

Most people must have health care coverage or pay the tax penalty, but here’s a list of specific cases where you may be able to get an exemption.

Exemptions include:

  • You’re uninsured for less than 3 consecutive months of the year
  • Your lowest-priced coverage option is more than 8% of your household income
  • You don’t have to file a tax return because your income is under the IRS filing requirement ($10,000 if single, 20,000 married filing jointly)
  • You’re a member of a federally recognized tribe or eligible for services through an Indian Health Services provider
  • You’re a member of a recognized health care sharing ministry
  • You’re a member of a recognized religious sect with religious objections to insurance, including Social Security and Medicare
  • You’re incarcerated, and not awaiting the administering of charges against you
  • You’re not lawfully present in the United States,
  • You may qualify for the Cancellation Hardship Exemption if you received a cancellation notice due to your health plan not meeting minimum requirements.
  • You also may qualify for a hardship exemption if your circumstances affected your ability to purchase health coverage

See a full list of hardship exemptions here.

How to apply for exemptions

Do you qualify for one of these conditions? If so, then what’s next?

If you’ve been uninsured for less than three consecutive months of the year, or you aren’t lawfully present in the U.S., you don’t need to apply for an exemption. This will be handled when you file your 2014 taxes next year.

Also, if you don’t have to file a tax return because your income is too low, you don’t need to apply.

You can claim certain other exemptions on your 2014 tax return when you file in 2015, such as exemptions based on coverage being unaffordable or being a member of a federally recognized tribe or ministry.

For all other exemptions, you’ll have to submit an application to the Health Insurance Marketplace along with required documentation in certain cases. Different exemptions require different forms, so be sure to apply with the correct form. You can find and print all of the forms here.

Comments (45) Leave your comment

  1. My fiance has not been able to find a job since 2011 so I claim him as a dependent on my taxes but i cant afford insurance for him. Will i be charged the penalty? Should i not claim him on my taxes, even thoygh i pay for all the bills?

    • Hi Jessica,
      Since you are not married and he would have to file as single you would not be responsible for the penalty. Because he has not worked, if he has not earned any income he would most likely be exempt from the penalty and the requirement to purchase health insurance since he falls under the exemption of not earning enough income to meet the IRS filing requirement.
      Thank you,
      Lisa Greene-Lewis

  2. Hello, what if you live overseas full-time, except for a few weeks a year in the USA.? Still a US citizen……

  3. I am unemployed, and live for more than 1 year outside US in a foreign country.now I am back home.still do I need to apply?

    • Hi abdou,

      If you spend 330 days of the year or more outside the U.S., you don’t need to submit an application to be exempt from the health care penalty fee. We can handle it on your taxes.

      If you come back to the U.S. and are unemployed, you could qualify for Medicaid in your state. See what the new health care law means for you at http://www.turbotaxhealth.com

    • If you are not a resident of the US you are not required to be covered under the ACA.

      Mary Ellen

  4. Texas women’s health plan….does this qualify as health coverage. U get birth control and yearly exams

    • Coverage for a specific disease or condition, and plans that solely offer discounts on medical services do not count as minimum essential coverage under the ACA.

    • Hi thomasandcassondra08,

      It looks like the Texas Women’s Health Plan doesn’t meet the minimum requirements under the Affordable Care Act to qualify as health insurance.

      But because Texas didn’t expand Medicaid, you might be exempt from the health care penalty fee. See what the new health care law means for you and whether you qualify for a penalty exemption at http://www.turbotaxhealth.com.

    • If all the plan covers is birth control and yearly exams, it does not cover the essential health benefits required by the ACA.
      It will not be eligible for the tax credit, and may not be protection from the tax penalties.

      Mary Ellen

  5. I am married to a person who is not in this country legally. Am I required to insure him and if he does not have insurance will I have to pay a penalty if he is my dependant on my taxes. He does not work at this time. I have been paying for his medical needs out of pocket as my employers charge to add him to my insurance is far more than paying out of pocket.

    • Joann,
      Your husband does not qualify to purchase insurance or to receive the credit. As an undocumented immigrant he is not covered by the mandate to have insurance and there will be no penalty for him.

      Mary Ellen

  6. I go to the VA hospital for medical treatments, and I have Medicare A&B.
    My wife has Medicare A, B, &D. We both are on Social Security. Are we exempt from this penalty to healthcare ???

    • Medicare qualifies as valid health insurance under the Affordable Care Act. You will NOT be subject to a penalty.

    • You and your wife are all set. Having Medicare A meets the Affordable Care Act requirement to have insurance, so you won’t owe a penalty fee.

    • Medicare is considered Minimum Essential Coverage. You should not incur a penalty as long as you carry Medicare.

    • Hi Allen,
      If you have Medicare you are covered. You are exempt from the penalty.

      Thank you,
      Lisa Greene-Lewis

  7. My current provider refuses to accept the ACA payment, because it is much lower than my old insurance. I’ve been unable to locate an acceptable doctor even though many are listed as accepting new patients. Total premiums for ACA are 20 % more, including subsidies, than my old insurance, yet doctor’s recieve 20 % less for services. HARDSHIP ???

    • The definition of Minimum Essential Coverage includes a provision for affordability. This may be worth following up.

  8. i have a chronic condtion for which I have regular acupuncture treatments and chinese medicine. None of the insurers on obamacare cover acupuncture, and I cannot afford to pay for both. Can I get an exemption?

  9. Where it says an exemption is: ■Your lowest-priced coverage option is more than 8% of your household income

    Is that for the Premiums, the deductions, or both?

  10. What if you are a full time student and you are no longer employed due to the elimination of the FWS program at your University. I’m seeking employment opportunities but nothing has come through as of yet.

    • Hi Aurielle,

      If you’re under 26, you’re eligible to be on your parents’ plan, which would meet the requirements of the law.

      Otherwise, if if the lowest-priced plan in your area is 8% of your income or more, you could be be exempt from the health care penalty fee. See what the new health care law means for you and whether you qualify for a penalty exemption at http://www.turbotaxhealth.com.

  11. I haven’t worked since 2011 & had unemployment til 2012, and still unemployed. With no income do I still have to pay a 95.00 fee and I tried for all the florida programs and I dont qualify either because of my age or not having kids.

    • Sounds like you may qualify for a subsidy from the government toward the cost of your healthcare. Talk to someone at healthcare.gov.

    • Hi Tara,

      Because your income is low and Florida did not expand Medicaid, you could be eligible to get your penalty fee waived.

      See what the new health care law means for you and whether you qualify for a penalty exemption at http://www.turbotaxhealth.com.

  12. My son is turning 26 at the end of this year. He is no longer eligible under our health insurance, but is unemployed and unable to afford his own premium. Although he is claimed as a dependent on our taxes, with only one income, we can’t afford the monthly premiums to get him health insurance. Will we still have to pay the penalty?

    • Are you taking into consideration that there is government subsidy available based on income? Talk to someone at healthcare.gov

    • Hi H. Ortiz,

      If you claim your son as a dependent, you will likely have to pay a penalty of either $95 or 1% of your income, whichever is greater.

      However, if your son files independently, his lack of income could make him exempt from the penalty.

      For you, it’s a matter of numbers. If the deduction you get for claiming your son as a dependent is greater than the penalty you would pay, you might still want to claim him. Otherwise, he might want to file on his own.

      See more about what the new health care law means for you at http://www.turbotaxhealth.com.

  13. I’m 59 & lucky to have a PT job but it doesn’t provide health insurance & I take home about
    $200 weekly. I can’t find affordable insurance &
    Obamacare is just scary !!! What can I do?

    • Re: Mary Repko’s post on July 22, 2014.

      – Age and similar work scenario.
      – No tax refund anticipated; have had to pay for last 3 or 4 years.

      Suggestions?

      Thanks.

    • Hi Mary,

      Depending on your home state, you could be eligible for Medicaid or low-cost health insurance. If your state didn’t expand Medicaid or your options still more than 8% of your income, you could be exempt from the health care penalty fee.

      See what the new health care law means for you and whether you qualify for a penalty exemption at http://www.turbotaxhealth.com.

  14. I was in the navy 1970. I SIGNED WITH VA. For healthcare. I have not used it yet. Do I still need obamacare. Will I have to pay tax penalty if I dont buy in to obamacare

    • Hi Gregory,
      No your health care should qualify for the insurance requirement. You will not have to a pay a penalty.
      Thank you,
      Lisa Greene-Lewis

    • It is correct, the VA insurance signed up for complies with coverage, no penalty. I would tell you to use it though, there are some exclusions if your not in the active VA system of usage with them. (even a once a year physical is good)

  15. I have coverage through my union , ibew. Do I need to be aware of any minimum requirements my coverage might be in violation of?…

    • Hi Bobby Stewart,

      If you have health care coverage through your union, it probably meets the minimum requirements set forth by the Affordable Care Act and won’t have to pay a penalty.

      See more about what the new health care law means for you at http://www.turbotaxhealth.com.

    • Thank you John. Please continue to check back for more up to date information.

      Lisa Greene-Lewis

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