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5 Groups Who Need to Report Healthcare on Taxes - Is it You?

February 6, 2015
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5 Groups Who Need to Report Healthcare on Taxes

Tax season is here. As you gather your W2’s, income statements, and receipts, there’s an additional piece of paperwork you’ll need this year - your healthcare information. While most tax filers will simply check an additional box on Form 1040, certain taxpayers will have a few more steps. What do you need to do?

Here are five common groups who will need to report healthcare on your taxes this year.

1. You Were Covered By Health Insurance Last Year

If you had health insurance coverage the full year, all you have to do at tax time is check a box on your Form 1040.

If you received coverage through an employer, or were covered by Medicaid or Medicare, you’re done.

However, if you were uninsured part of the year, purchased coverage on your own, or are a small business owner, you may have a couple more steps. Keep reading.

2. You Were Uninsured Last Year, or Part of the Year

If you were uninsured all last year, or uninsured for part of the year, you might be required to pay an Individual Shared Responsibility Penalty. That is, if you don’t qualify for an exemption.

How Much is the Fee?

For the year 2014, the fine is the greater of $95 for each adult and $47.50 for each child (up to $285 per family), or 1% of family income minus the federal tax filing threshold. The federal tax filing threshold is $10,150 for a person who files singly, $20,300 for somebody who files jointly.

What if I Was Only Uninsured Part of the Year?

Also, the fine is assessed based on “coverage months.” This means that each month you are uninsured, you may owe 1/12th of the annual fine. However, short spells of being uninsured may not be subject to a fine (see exemptions below).

What are the Exemptions?

If you were uninsured, there are several exemptions to the penalty including:

  • Cannot afford coverage (defined as those who would pay more than 8% of their household income for the lowest cost bronze plan available to them through the Marketplace)

  • Are not a U.S. citizen, a U.S. national, or a resident alien lawfully present in the U.S.

  • Had one gap in coverage for less than 3 consecutive months during the year

  • Won’t file a tax return because your income is below the tax filing threshold (In 2014, the tax filing threshold is $10,150 for individuals and $20,300 for a couple)

  • Are unable to qualify for Medicaid because your state has chosen not to expand the program

  • Participate in a health care sharing ministry or are a member of a recognized religious sect with objections to health insurance

  • Are a member of a federally recognized Indian tribe

  • Are incarcerated

Others who do not qualify through these categories but have experienced a hardship that makes it difficult to purchase insurance may apply through the health insurance marketplace for an exemption to the individual responsibility requirement. Read more about hardship exemptions here.

3. You Received (or are Applying For) a Premium Tax Credit

If you received a premium tax credit, or are applying for one, you will file an additional form - Form 8962. On this form you will report information about your family size, actual household income, what you paid for health insurance, and the amount of advanced premium tax credit you received.

The form uses this information to reconcile the amount of your premium tax credit you’re eligible for with any advanced premium tax credit you received.

If your actual income differs from what you estimated when you purchased health insurance, you may be required to pay back a portion of the credit - or receive a refund.

Read more about how to deal with the premium tax credits on your taxes here.

4. You Own a Business

If you own a business, you may need to report the cost of health insurance coverage on employees’ W2 Forms.

This requirement started in 2012 and applies to your business if you have more than 250 W2 employees, and you offer employer-sponsored group health coverage.

At this time, W-2 reporting is optional for smaller employers and for employers offering health insurance alternatives such as individual health insurance reimbursement.

Read more about W2 reporting.

5. You are Self-Employed

Lastly, if you are self-employed you may be able to take a deduction for your health insurance premiums. While this is not a new healthcare tax option, it is a good reminder that many self-employed taxpayers can deduct health insurance premiums, including age-based premiums for long-term care coverage.

The line 29 deduction on the 1040 return is available to those whose business income shows a profit, who are not eligible for employer-provided insurance (either from a side job or a spouse’s job), and who meet other criteria.

Conclusion

Healthcare is now a part of taxes, but for many it is simple - check the box that you were covered last year. However if you were uninsured, received a premium tax credit, or are a small business owner, there are a few new reporting requirements.

What questions do you have about healthcare and taxes this year? Leave a comment and we’ll help answer them.

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