Ed note: If you didn’t have health insurance in 2014, you may be avoiding your tax return in fear of having to pay a penalty. There’s good news, though. You may qualify for an exemption – which means you don’t have to pay the fee. Here’s a closer look at some exemptions that are a little more complicated.
Whether or not you took advantage of buying health care through the Federal Marketplace, you’ll probably have to deal with some parts of the Affordable Care Act (ACA) when filing your taxes. Figuring out how the law affects your taxes can seem overwhelming, but luckily H&R Block has an ACA Tax Impact Calculator and tax professionals who are ACA Specialists to guide you through each step.
If you didn’t have health coverage during all or part of 2014, you’ll have to either pay the ACA tax penalty (also known as the “shared responsibility payment” or “fee”), or claim an “exemption,” which waives the fee you otherwise would have paid because you did not have health insurance coverage. There are a variety of exemptions, many of which can be claimed on your federal tax return. Some common exemptions from buying health coverage include having too little income, religious objections, incarceration or being out of the country.
There are also “hardship” exemptions. Hardship exemptions are tough life situations that have prevented you from getting health insurance. For some of these hardships, you’ll have to include proof of the situation in your application, such as a notice from a power company that your utilities were shut off. For others, like homelessness, you won’t have to provide documentation.
The list below details what paperwork you’ll need when applying for a hardship exemption. Your tax professional will guide you through the process.
| # | Hardship Exemption | Documentation needed to apply |
|---|---|---|
| 1 | You were homeless between January 1, 2012 and December 31, 2014. | None. |
| 2 | You were evicted in the past six months or were facing eviction or foreclosure. | Eviction or foreclosure notice. The date of the notice must be within the last 6 months. |
| 3 | You received a shut-off notice from a utility company. | Shut-off notice from a utility company that states service has or will be shut-off. |
| 4 | You recently experienced domestic violence. | None. |
| 5 | You recently experienced the death of a close family member. | Death certificate, death notice from newspaper, funeral service program, funeral expenses, coroner’s report, military notification of death, or other official notice of death. |
| 6 | You experienced a fire, flood, or other natural or human-caused disaster that caused substantial damage to your property. | Police or fire report, insurance claim, or other document from government agency, private entity, or news source about the event. |
| 7 | You filed for bankruptcy in the last six months. | Official bankruptcy filing documents from a date within the last 6 months. |
| 8 | You had medical expenses you couldn’t pay in the last 24 months that resulted in substantial debt. | Medical bills from a date within the last 24 months. |
| 9 | You experienced unexpected increases in necessary expenses due to caring for an ill, disabled, or aging family member. | Receipts for bills or services related to care, like medical bills, home care services, or transportation receipts. |
| 10 | You expect to claim a child as a tax dependent who’s been denied coverage in Medicaid and CHIP, and another person is required by court order to give medical support to the child. In this case, you don’t have the pay the penalty for the child. | Court order that covers the time period for which you want the exemption AND copies of eligibility notices for Medicaid and CHIP which show that the child has been denied coverage. |
| 11 | As a result of an eligibility appeals decision, you’re eligible for enrollment in a qualified health plan (QHP) through the Marketplace, lower costs on your monthly premiums, or cost-sharing reductions for a time period when you weren’t enrolled in a QHP through the Marketplace. | Notice of appeals decision. |
| 12 | You were determined ineligible for Medicaid because your state didn’t expand eligibility for Medicaid under the Affordable Care Act. | Notice of denial of eligibility for Medicaid. The notice must be from a date during the time period for which you’re requesting the exemption. |
| 13 | Your individual insurance plan was cancelled and you believe other Marketplace plans are unaffordable. | Notice of cancellation from the insurance company. |
| 14 | You experienced a hardship that kept you from getting health insurance that’s NOT listed in categories #1-13. | There are a limited number of other hardships that qualify. Follow the instructions to claim another hardship on page 3. |
When you apply for a Marketplace hardship exemption, here’s what will happen:
- Your tax pro will walk you through each step of the exemption process. First, they will look at which exemptions you may qualify for and then will help you fill out a large portion of the Marketplace Exemption Application. After your tax appointment, you will need to complete the application, sign and mail the application and necessary documentation.
- The Marketplace will review it and determine if you qualify, and then send you a written notification of your status. You should hear back within two to four weeks, if your application is in good order.
- If you qualify for a hardship exemption, you’ll be issued a unique Exemption Certificate Number (ECN). If you have already filed your federal tax return with a pending Marketplace exemption, you won’t need to take any additional action. However, if you have not yet filed, you’ll need to bring your ECN to your tax appointment. Your tax pro will use it to complete IRS Form 8965, “Health Coverage Exemptions,” which will be added to the rest of your tax return. Each member of your household who qualifies for the exemption will get their own ECN.
And don’t forget to take a deep breath. We’re here to help.
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