About the Obamacare TAX

Individual Mandate – If you are aware of only one ACA-related impact on your taxes, it is probably this one. You are required to have a qualified health insurance plan through some source — the federal exchange at healthcare.gov, a state exchange, employer, or direct purchase from an insurer. Qualified plans are those that meet minimum criteria as outlined by the ACA.

The penalty for not having insurance for the 2015 tax year is the greater of $325 per adult in the household and $162.50 per child up to $975 for a family, or 2% of household income above the threshold to file a tax return for your filing status. In 2016, this will rise to $695 per adult and $347.50 per child up to $2,085 for a family, or 2.5% of your household income — so it is important to sign up during the open enrollment period. Every month without suitable insurance coverage incurs one month’s worth of the penalty.

To verify your status, you will receive a 1095 form — either A, B, or C depending on the source of your insurance. 1095-A forms are supplied by the federal exchange and are necessary to fill out tax forms if you purchased coverage through the exchange. Insurers provide 1095-B forms, while employers supply 1095-C forms. Neither B nor C forms are necessary for you to fill out your taxes.

Premium Tax Credit – This is another name for the subsidies that help low-income families who purchased health care through healthcare.gov. The subsidies are tax credits that can be taken when you file your tax return or taken in advance and sent to your insurance provider to help with the premium costs.

If you take the premium tax credit in advance, it will be based on an estimate of your income for the year as well as your family size. If things change during the year such as the birth of a child, divorce, loss of a job, or an increase in salary, the actual subsidy for which you qualify will be different from what you have received. You could end up owing on your taxes effectively to refund an excess subsidy. Notify the exchange as soon as any of these changes takes place to limit the effect on your taxes.