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Wednesday, May 6, 2015

Affordable Healthcare Act A.K.A Obamacare FAQs

There are no doubt a lot of concerns about the affordable healthcare act and it's effect on your 2014 1040 tax return. I'll try to answer some common questions as best I can without making your head spin sideways. Please contact me if you have further questions.

Ok, so what is this "DD" code in my W-2 box 12? Does this mean that I am being taxed on my health insurance??
The reason for the DD code in box 12 is to indicate the value of the health insurance benefits your employer has paid for in the given tax year. No, you are not taxed on this payment of health insurance. The amount in box 12 coded "DD" does not increase the amount of taxes you will pay as an employee. It is for informational purposes.

As stated in the new law, if you do not have health insurance, you are subject to a tax penalty. Of course, it's not called a tax penalty, it's called a "shared responsibility payment".
The penalty for not having healthcare is $95 for each adult and $47.50 for each child OR 1% of your income, whichever is GREATER.
The maximum penalty you will pay per family for 2014 is $285Your penalty for being uninsured will look like this:
↓ You pay whichever is GREATER ↓
But not more than THIS ↓
Even if you make MORE than this income ↓
Year Tax per person % of income Max per family Income level
2014 $95 1.0% $285 $28,500
2015 $325 2.0% $975 $48.750
2016 $695 2.5% $2,085 $83,400
So basically, the idea is to inflict financial pain on the uninsured individual/family until they are forced to buy health insurance.
The Affordable Healthcare Act penalty will be paid as any other income tax liability through the income tax 1040 form. If you have a refund, the penalty will be deducted from your refund.

If you were insured for part of the year, you may or may not need to pay the Affordable Healthcare Act, depending on how long you were insured for.
The new healthcare law states that you must have had healthcare coverage for atleast 8 complete months of the tax year, hense the March 31, 2014 deadline of signup for healthcare coverage.
Be aware that there are some exceptions and hardships that can be claimed depending on your situation

Yes, there are some exceptions to the rule. In fact, there are many acceptions to the rule. Many taxpayers that would have to pay the Affordable Healthcare Act penalty are able to claim these acceptions, so you will want to pay especially close attention to this section.
These exemptions are straight from the website. I will list them. You will be exempt from the Obamacare penalty if:
You were uninsured for less than 3 months of 2014 (the 8 month rule)
The lowest-priced coverage available to you would cost more than 8% of your household income
You don’t have to file a tax return because your income is too low
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 (Omish, Mennonite, Etc. there was a rumor that Muslims would be included in this, but that is not true. Only those recognized by S.S. are included)
You’re incarcerated (either detained or jailed), and not being held pending disposition of charges
You’re not lawfully present in the U.S.

If none of the above apply to you, you may be eligable for these "hardship" excemptions:
You were homeless.
You were evicted in the past 6 months or were facing eviction or foreclosure.
You received a shut-off notice from a utility company.
You recently experienced domestic violence.
You recently experienced the death of a close family member.
You experienced a fire, flood, or other natural or human-caused disaster that caused substantial damage to your property.
You filed for bankruptcy in the last 6 months.
You had medical expenses you couldn’t pay in the last 24 months which resulted in substantial debt.
You experienced unexpected increases in necessary expenses due to caring for an ill, disabled, or aging family member.
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 do not have the pay the penalty for the child.
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.
You were determined ineligible for Medicaid because your state didn’t expand eligibility for Medicaid under the Affordable Care Act.
Your individual insurance plan was cancelled and you believe other Marketplace plans are unaffordable.
You experienced another hardship in obtaining health insurance.

Well, at this point you have plenty of options. The last exemption practically allows you to "fill in the blank", or basically make up your own "My dog ate my homework" type excuse as to why you couldn't get insure. I mean, everyone's got a sad story about why they can't get health insurance, right? Hey, anything is worth a try.

If you meet an exemption, you may file for the exemption 2 different ways:
Option 1: There will be a new line on the 1040 form to fill in your exemption. Your tax preparer will fill this part out with you.
Option 2:
Fill out this form if healthcare is unaffordable for you.
Fill out this form if you are part of a healthcare sharing ministry.
Fill out this form if you are exempt as part of an American Indian Tribe.
Fill out this form if you are exempt based on incarceration

The premium Tax Credit is designed to subsidize the cost of health insurance for those making up to 138% of the Federal Poverty Level.
Here's a chart to explain the maximum Premium Tax Credit for 2014 based on the size of your family on your tax return (you + spouse + dependents)
↓ Select the number of individuals on your tax return↓
1 2 3 4 5 6 7 8
$16,100 $21,700 $27,310 $32,910 $38,510 $44,110 $49,720 $55,320

You can choose to get your Premium Tax Credit now or when you get your tax refund/against the balance of your tax liability.