Your taxes and the Affordable Care Act

COLUMBIA, Mo. – This year, when filing your income taxes, you’ll be asked if you had health insurance in 2014.

“According to the Affordable Care Act, everybody has to have health insurance. If you didn’t have health insurance, but you had a good reason, then you get an exemption,” said Andrew Zumwalt, assistant professor of finance for University of Missouri Extension. “If you didn’t have health insurance and you don’t have a good reason, then you’ll have to pay a penalty.”

What would be a good reason?

 “There are some big exemptions for the Affordable Care Act. One is when your income is below the filing threshold,” Zumwalt said. “For example, the filing threshold for a married couple is $20,300. If your income is below that amount, then you won’t have to pay a penalty.”

Because Missouri chose not to expand its Medicaid program under ACA, there is another big exemption for Show-Me-State residents: If your household income is below 138 percent of the poverty line for your household size, you’ll pay no penalty, Zumwalt said. So a family of four making less than $31,005 would not be penalized.

No health insurance and no exemption will cost you.

“The penalty for the Affordable Care Act is $95 per adult on the tax return and $47.50 per child on the tax return up to a maximum of $285,” Zumwalt said. “Or it’s 1 percent of your household income above the filing threshold for your family. There’s also a maximum cap on the 1 percent calculation, which is the national average cost for a bronze plan on the health insurance marketplace, he says.

Here’s an example from the IRS:

• A single individual with $40,000 income.
  • Subtract $10,150 (filing threshold) from $40,000.
  • Result: $29,850.
  • 1 percent of $29,850 = $298.50.
  • The flat fee amount is $95.
• $298.50 is greater than $95, so the 2014 payment is $298.50.

There are a lot of twists and turns when navigating the Affordable Care Act. If you or members of your family did not have medical coverage last year, it might be a good idea to get help filing your 2014 taxes.

“It’s going to be more complicated to file your taxes,” Zumwalt said. “You might consider getting the advice of a professional, visit a Volunteer Income Tax Assistance site or seek other resources.”

If you purchased coverage in the health insurance marketplace, the other part of the Affordable Care Act that can affect your taxes is the premium tax credit.

“On form 8962, you will reconcile what you reported to the marketplace as your estimated income with your actual income,” Zumwalt said. Your actual income will determine how much premium tax credit you’ll get to help pay for your health care coverage.

If your actual income was lower than your estimated income, you’ll likely get additional tax credits, he said. “If your income was higher than you estimated, you’ll likely have to pay back some of that premium tax credit.”

If you must repay some of the premium tax credit, there may be a cap on the amount, Zumwalt said. If a single person’s household income is below 200 percent of the federal poverty line, the maximum repayment is $300.

However, there is no cap if your actual income was over 400 percent of the federal poverty line for your household size, he said.

The least affected people, as far as the Affordable Care Act is concerned, are those who get health insurance through work.

“All you have to do on your taxes is check a box,” Zumwalt said.

For more information, see “What do I really need to know about the Affordable Care Act?” at http://extension.missouri.edu/about/w2014-aca_needtoknow.aspx.