Under the Affordable Care Act, individuals must fall into one of the following 3 categories: (1) Those who have qualifying health insurance (minimum essential coverage), (2) those who qualify for an exemption from the responsibility to have minimum essential coverage, or (3) those who are required to make the shared responsibility payment (penalty) when they file their federal income tax return.
Those who fall in category 2 are exempt from the requirement to maintain minimum essential coverage and thus will not have to make a shared responsibility payment (penalty) when they file their federal income tax return.
Generally, you may be exempt if you: (a) have no affordable coverage options because the minimum amount you must pay for the annual premiums is more than eight percent of your household income, (b) have a gap in coverage for less than three consecutive months, or (c) qualify for an exemption for one of several other reasons, including having a hardship that prevents you from obtaining coverage.
Taxpayers whose gross income is below their applicable minimum threshold for filing a federal income tax return are exempt from the individual shared responsibility provision and are not required to file a federal income tax return to claim the coverage exemption. However, if the taxpayer files a return anyway (for example, to claim a refund), they can claim a coverage exemption with their return.
Taxpayers who are granted a coverage exemption from the Marketplace will receive an exemption certificate number (ECN) from the Marketplace and will enter their ECN in Column C of Part I of Form 8965, Health Coverage Exemptions.
Other coverage exemptions may be claimed with the IRS using Part III (Coverage Exemptions for Individuals Claimed on Your Return) of Form 8965. You must use a separate line for each individual and exemption type claimed on the return.
For more detailed information on how to claim an exemption, grab yourself a copy of the e-book, “The Affordable Care Act—The Implications for Your Tax Returns” ($2.98) in the TaxConnections Tax Store.
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