Individual Shared Responsibility Provision
This year, there are some changes to tax forms related to the Affordable Care Act. For the first time, you will report health care coverage on your tax return. Most taxpayers will simply check a box to indicate that each member of their family had qualifying health coverage for the whole year. If you are not required to file a tax return and don’t want to file a return, you do not need to file a return solely to report your coverage or to claim an exemption.
You should consider preparing and filing your tax return electronically. Using tax preparation software is the easiest way to file a complete and accurate tax return. Electronic Filing options include free Volunteer Assistance, IRS Free File, commercial software and professional assistance.
The individual shared responsibility provision requires you and each member of your family to do one of the following:
- Have qualifying health coverage called minimum essential coverage;
- Qualify for a health coverage exemption, or
- Make a shared responsibility payment when you file your 2014 federal income tax return in 2015.
Many people already have minimum essential coverage and do not need to do anything more than maintain that coverage and report their coverage when they file their tax returns.
Find out if you must make a payment by using our interactive tool, Determine if you are Responsible for the Individual Shared Responsibility Payment.
Minimum Essential Coverage
You are considered to have minimum essential coverage for the entire month as long as you are enrolled in and entitled to receive benefits under a plan or program that is minimum essential coverage for at least one day during that month. For example, if you start a new job on June 26 and are covered under your employer’s health coverage starting on that day, you’re treated as having coverage for the entire month of June. Similarly, if you’re eligible for a coverage exemption for any one day of a month, you’re treated as exempt for the entire month. For any month that you do not have minimum essential coverage you will need to qualify for an exemption or make a shared responsibility payment.
Minimum essential coverage includes:
- Most health insurance coverage provided by your employer,
- Health insurance purchased through the Health Insurance Marketplace in the area where you live, where you may qualify for financial assistance,
- Coverage provided under a government-sponsored program for which you are eligible (including Medicare, Medicaid, and health care programs for veterans),
- Health insurance purchased directly from an insurance company, and
- Other health insurance coverage that is recognized by the Department of Health & Human Services as minimum essential coverage.
U.S. citizens who are residents of a foreign country for an entire year, and residents of U.S. territories, are considered to have minimum essential coverage for the year. See questions 11 and 12 of our Questions and Answers for more information.
Visit HealthCare.gov to learn more about which health insurance options are available to you, how to purchase health insurance coverage, and how to get financial assistance with the cost of insurance. If you purchase health insurance through the Marketplace and you meet certain requirements, you may be eligible for a premium tax credit to help pay your premiums. Visit our premium tax credit page to learn more about this credit.
Each year the Health Insurance Marketplace has an open enrollment period. The open enrollment period to purchase health care insurance for 2015 runs from Nov. 15, 2014, through Feb. 15, 2015. Contact the Marketplace at HealthCare.gov to enroll.
If you meet certain criteria, you may be exempt from the requirement to have qualifying health coverage. If you are exempt, you will not have to make a shared responsibility payment when you file your 2014 federal income tax return in 2015. For any month that you do not qualify for a coverage exemption, you will need to have minimum essential coverage or make a shared responsibility payment.
How you get a coverage exemption depends upon the type of exemption for which you are eligible. You can obtain some exemptions only from the Marketplace while others may be claimed when you file your tax return. Some exemptions can be obtained from the Marketplace or claimed on your tax return. You will report an exemption obtained from the Marketplace when you file your tax return.
You may be exempt if:
- The minimum amount you must pay for the annual premiums is more than eight percent of your household income;
- You have a gap in coverage that is less than three consecutive months; or
- You qualify for an exemption for one of several other reasons, including having a hardship that prevents you from obtaining coverage, or belonging to a group explicitly exempt from the requirement.
Learn more about exemptions in this chart and in questions 21-24 of our Questions and Answers. For more information on hardship exemptions, you can also visit Healthcare.gov and access HHS guidance and Questions and Answers.
Shared Responsibility Payments
For any month during the year that you or any of your dependents don’t have minimum essential coverage and don’t qualify for a coverage exemption, you will need to make an individual shared responsibility payment with your tax return.
In general, the annual payment amount is the greater of a percentage of your household income or a flat dollar amount, but is capped at the national average premium for a bronze level health plan available through the Marketplace. You will owe 1/12th of the annual payment for each month you or your dependent(s) don’t have either coverage or an exemption.
If you must make a payment, you can use the worksheets located in the instructions to Form 8965, Health Coverage Exemptions, to figure the shared responsibility payment amount due. For more information about determining the amount and reporting your payment on your tax return, see our Reporting and Calculating the Payment page.
Reporting Coverage, Exemptions, and Payments
You will need to report minimum essential coverage, report or claim a coverage exemption, or make an individual shared responsibility payment when you file your 2014 federal income tax return in 2015. If you are not required to file a tax return and don’t want to file a return, you do not need to file a return solely to report your coverage or to claim an exemption.
If you and your dependents all had minimum essential coverage for each month of the tax year, you will indicate this on your 2014 tax return by simply checking a box on Form 1040, 1040A or 1040EZ; no further action is required.
If you obtained a coverage exemption from the Marketplace or you qualify for an exemption that you can claim on your return, you will file Form 8965 with your tax return. See our Claiming and Reporting an Exemption page for more information about how to report and claim an exemption on your tax return.
For any month you or your dependents did not have coverage or a coverage exemption, you will have to make a shared responsibility payment. The payment will be reported on Form 1040, line 61 in the Other Taxes section and on the corresponding lines on Form 1040A and 1040EZ. See our Individual Shared Responsibility Provision – Reporting and Calculating the Payment page for more information about figuring and reporting the payment.
View the following Individual Tax Provisions - Webinar (Mar 6, 2015) for an overview of the Individual Shared Responsibility Provision including reporting coverage, claiming coverage exemptions and making a shared responsibility payment. The webinar also includes information about claiming and reconciling advance payments of the Premium Tax Credit for taxpayers who purchased 2014 health coverage through the Health Insurance Marketplace.
More detailed information about the individual shared responsibility provision is available in our Questions and Answers. The Department of the Treasury and the IRS have issued the following legal guidance related to the individual shared responsibility provision, including detailed examples of the payment calculation:
- Publication 5209 - Preparing Your 2014 Tax Return - the shared responsibility payment
- Publication 5156 – Facts about the Individual Shared Responsibility Provision
- Publication 5172 – Facts about Health Coverage Exemptions
- Final regulations on the individual shared responsibility provision.
- Notice 2013-42, which provides transition relief from the individual shared responsibility provision for employees and their families who are eligible to enroll in employer-sponsored health plans with a plan year other than a calendar year if the plan year begins in 2013 and ends in 2014.
- Proposed regulations on minimum essential coverage and other rules regarding the shared responsibility provision.
- Notice 2014-10, which provides transition relief for individuals enrolled in coverage under certain limited-benefit Medicaid and TRICARE programs that are not minimum essential coverage.
- Rev. Proc. 2014-46, which provides the 2014 monthly national average premium for qualified health plans that have a bronze level of coverage.
Additional information on exemptions and minimum essential coverage is available in final regulations issued by the Department of Health & Human Services.