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Health and Medical Tax Topics

Tax Impacts of the Affordable Care Act (ACA)

Enacted in 2010, the Patient Protection and Affordable Care Act (ACA) is health insurance reform that affected every American. In 2017, the Tax Cuts and Jobs Act (TCJA) was passed that eliminated the federal penalty for taxpayers who didn’t have health insurance.

Health Insurance Marketplace

The ACA also created state Health Insurance Marketplaces for taxpayers who do not have health insurance. The purpose of the marketplaces was to offer affordable insurance and allow lower-income taxpayers to estimate how much Premium Tax Credit the taxpayer will qualify for when they file their tax return and use that credit to offset their health insurance’s out-of-pocket cost. If you bought health insurance through a state or the federal marketplace, you must still wait for Form 1095A which reports your health insurance premiums and the amount of credit used already. Form 1095A is used to complete Form 8962, Premium Tax Credit, which is used to reconcile your advance payment of the credit on your federal return.

If you bought health insurance through a state marketplace, you must still wait for Form 1095A to reconcile your Premium Tax Credit and file IRS Form 8962 with your federal return.

Some state penalties remain

While there is no longer a federal penalty for failing to have health insurance, five states and the District of Columbia still have an individual mandate and may penalize taxpayers who don’t have health insurance. The mandate and penalty still apply for residents of California, Massachusetts, New Jersey, Rhode Island, and the District of Columbia. While Vermont still has a mandate, it does not currently assess a penalty and if you live in any other state, there’s currently no penalty or requirement for health coverage to worry about.

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