Okay, you know you will likely get socked with another penalty on your 2016 tax return, but there is no way you can afford health coverage for the entire year. It just hasn’t gone your way for what ever reason. There are a few ways to reduce or get out of the penalty, so start putting together the paperwork now.
A.If both of the following apply to you in 2016, you may qualify for a health coverage exemption. If you qualify, you qualify for the entire year.
- You live in a state that hasn’t expanded its Medicaid program under the Affordable Care Act (Michigan qualified for this exemption because it did not expand its program, OH, IN and KY did not because they expanded their programs ).
- Your income and household size would have qualified you or your family for Medicaid if the state had expanded coverage
- Your yearly income for 2016 was below 138% of the federal poverty level. In most U.S. states, that’s about $16,242 for an individual, $21,983 for a couple, or $33,465 for a family of 4.
- You must provide a copy of your Medicaid denial notice.
B.Anyone with a gap in health coverage of no more than 2 consecutive months can claim this exemption.
If anyone else on your tax return qualifies, you can claim this exemption for them too when you file your taxes.
- You’re considered covered any month you had minimum essential coverage for even 1 day.
- Example: You didn’t have coverage from March 2 to June 15. Your coverage gap was 2 months – April and May. You qualify for the exemption.
- This is good only once. If you get coverage then until Sept, but don’t have it for two months in Oct and Nov, you cannot get a second exemption.
C. Hardship exemptions include:
- You were homeless
- You were evicted or were facing eviction or foreclosure
- You received a shut-off notice from a utility company
- You experienced domestic violence
- You experienced the death of a 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
- You had medical expenses you couldn’t pay that 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 for Medicaid and CHIP for 2016, and another person is required by court order to give medical support to the child. In this case you don’t have to 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 in 2016
- You were determined ineligible for Medicaid because your state didn’t expand eligibility for Medicaid in 2015 under the Affordable Care Act
- Your individual insurance plan was cancelled after June 30, 2013 and you believe other Marketplace plans are unaffordable
- If you experienced another hardship obtaining health insurance
D. There are also still exemptions if the taxpayer is a member of a federally recognized tribe, health care sharing ministry, or recognized religious group with stated objections. And of course the obvious certain type of noncitizen, nonpresent, some of those living abroad (all of these need research) as well as those jailed who get exemptions to the health care requirement.
E. The most frequent used exemption, other than perhaps the 2 month loophole, is the income exemption. Taxpayers whose income is below a specific percentage of the poverty line are exempted from the health affordable care act.
And since some of these exemptions must be granted by the marketplace prior to filing the tax return. Don’t wait until the last minute. This is one time to plan ahead.