Affordable Care Act

The Affordable Care Act requires all U.S. citizens to have medical insurance, and the Act provides that some citizens will receive a monthly subsidy so that they can afford to purchase medical insurance. Failure to maintain a medical insurance policy may result in financial penalties being imposed, unless the taxpayer qualifies for an exemption.

A taxpayer will be exempt from the financial penalty if he/she qualifies for one of the following nineteen exemptions:

  • Coverage is considered unaffordable (more than 8 percent of your actual household income for the year as computed on your tax return)
  • There was a gap in coverage for less than three consecutive months during the year
  • Income for the year is less than the minimum threshold for filing a tax return
  • S. Citizens or residents who fall into one of the following categories even if you have a social security number: (1) U.S. citizen or resident spent at least 330 full days outside the U.S. during the 12-month period, (2) U.S. citizen was a bona fide resident of a foreign country or U.S. territory, or (3) Resident alien who was a citizen of a foreign country with which the U.S. has an income tax treaty with a nondiscrimination clause, and was a bona fide resident of a foreign country for the tax year
  • Member of a health care sharing ministry (organization described in section 501(c)(3) whose members share a common set of ethical or religious beliefs and have shared medical expenses in accordance with those beliefs continuously since at least December 31, 1999)
  • Member of Federally-recognized Indian tribe
  • Incarceration (after the disposition of charges)
  • Member of a religious sect in existence since December 31, 1950 that is recognized by the Social Security Administration as opposed to accepting insurance benefits
  • Two or more family members’ aggregate cost of self-only employer-sponsored coverage exceeds 8 percent of the household income, as does the cost of any available employer-sponsored coverage for the entire family
  • Gap in coverage at the beginning of 2014 but you (1) enrolled in coverage through the federally-facilitated Marketplace by March 31, 2014, (2) enrolled in coverage through a state-based Marketplace by March 31, 2014, or (3) enrolled in coverage outside the Marketplace with an effective date on or before May 1, 2014.
  • Experienced circumstances such as homelessness, eviction, foreclosure, domestic violence, death of a close family member, and unpaid medical bills
  • Coverage considered unaffordable based on your projected household income
  • Ineligible for Medicaid solely because you live in a state that does not participate in Medicaid expansion under the Affordable Care Act
  • Reside in a state that did not expand Medicaid and your household income is below 138 percent of the federal poverty line for your family size
  • Unable to renew existing coverage because of notification that your health insurance policy was not renewable and other plans available are unaffordable
  • Applied for CHIP coverage during the initial open enrollment period and were found eligible for CHIP based on that application but had a coverage gap at the beginning of 2014
  • Engaged in service in the AmeriCorps State and National, VISTA, or NCCC programs and are covered by short-term duration coverage or self-funded coverage provided by these programs
  • Enrolled in certain types of Medicaid and TRICARE programs that are not minimum essential coverage (only in 2014)
  • Were eligible, but did not purchase coverage under an employer plan with a plan year that started in 2013 and ended in 2014 (only in 2014)

The IRS administers the penalty provisions that are imposed on taxpayers who do not purchase insurance, the penalties for purchasing too expensive a policy (called a Cadillac Policy), and with sending the monthly subsidies. If a taxpayer pays more in medical insurance premiums than the subsidy that is received, the taxpayer may be entitled to a refund. If the opposite occurs, the taxpayer may have to repay the IRS the difference.  The taxpayer is required to submit Form 1092-A from the insurance provider, along with IRS Form 8962 (Premium Tax Credit), and reconcile the amount paid and the amount received.


Publication 5187 – Health Care Law:  What’s New for Individuals & Families)

Publication 974 – Premium Tax Credit (PTC)

IRS Form 8962 – Premium Tax Credit (PTC)