How Does the New Tax Law Affect My Health Insurance?

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Tax Reform made changes to the tax law effective in the 2018 tax year for the majority of taxpayers. A few of the changes include the reduction of five of seven tax brackets, an increase in the standard deduction, and the $10,000 limit on state income taxes or sales tax and property taxes.

The new tax law also effectively repealed the individual mandate or tax penalty for not purchasing health insurance beginning with your 2019 health insurance and 2019 taxes that you file in 2020.

What is the individual mandate?

The majority of taxpayers already have health insurance through an employer, Medicaid, Medicare, or private insurance. The individual mandate is a provision of the Affordable Care Act that requires all Americans to get “minimal essential coverage” health insurance. There are some exemptions, but if you don’t qualify for an exemption and you don’t get “qualifying coverage” (health insurance), you may be subject to a tax penalty in years prior to the 2019 tax year.

How much is the penalty for 2018?

Since the new tax law did not affect your 2018 health insurance or tax return, you may be subject to a tax penalty if you did not purchase health insurance. That penalty is $695 per adult plus any inflation adjustment (up to $2,085 maximum) or 2.5% of your household income minus your filing threshold amount, whichever is higher.

To know exactly what health coverage you had for 2018, you should have received a Form 1095-A, Form 1095-B or a Form 1095-C depending on how you purchased your health insurance.

What are the details of the repeal?

The new tax law essentially repeals the tax penalty for not purchasing health insurance. Technically, individuals are still required to obtain health insurance but if you don’t, you no longer have to pay the tax penalty beginning with your 2019 tax return.

For many larger companies, not much has changed. If you are part of an applicable large employer, which is defined as having fifty or more full-time employees, your employer must offer “minimum essential coverage” that is “affordable” and provides “minimum value” to full-time employees or make an “employer shared responsibility” payment to the IRS. This is similar to an individual mandate but for employers with more than fifty employees.

Don’t worry about knowing these tax laws. TurboTax will ask you simple questions and give you the tax deductions and credits you’re eligible for based on your answers. If you have questions, you can connect live via one-way video to a TurboTax Live CPA or Enrolled Agent with an average 15 years’ experience to get your tax questions answered from the comfort of your home. TurboTax Live CPAs or Enrolled Agents are available in English and Spanish and can also review, sign, and file your tax return.

Comments (4) Leave your comment

  1. Under the 2019 rules, am I required to buy prescription coverage? I have no maintenance prescriptions, a large deductible and I pay $361 a year to be legal. What’s new

    1. B an d are mandatory as set out in Medicare changes in the 80s much like aca. The penalty come later when you sign up for b or d

  2. Important to know! If you are a resident of Massachusetts you will still be subject to an individual mandate to have health insurance that meets the coverage standards. The mandate is one of the reasons MA has lower cost plans and the highest rate of insured residents.

    1. I am a resident of Nevada. I have Medicare, a medicare supplement and the Rx coverage. Does this change my requirements? I just thought it was all a federal requirement.

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