Pending any potential repeal and replacement of the Affordable Care Act, the law at this time still requires most Americans to have some form of qualified health care coverage. Absent such coverage, the law levies tax penalties against those who do not have employer-provided health insurance and who elect not to enroll in a plan offered through a state, federal or private insurance exchange.
But there are several key exemptions people may be eligible for that will allow you to waive the penalties come tax time. The website HealthCare.gov has a handy primer on what those exemptions are, how to apply and what happens after. Those exemptions are based on a number of circumstances, including certain hardships, some life events, financial status, and even membership in certain groups. Click here for various exemption forms from HealthCare.gov.
If you were homeless, if you faced eviction or foreclosure, filed for bankruptcy, or even had medical expenses you couldn’t pay, you may be eligible for a hardship exemption under the law. Other hardship exemption categories include the following: if you experienced domestic violence; if you were the victim of a flood, fire or other natural or human-caused disaster that substantially damaged your property; or if you experienced the death of a close family member. You may even be able to claim an exemption if you had an unexpected increase in expenses due to caring for an ill, disabled or aging family member.
The HealthCare.Gov website lists a number of exemptions as well as the forms needed for you to apply for one.
Another key exemption is available for those who were without insurance for only a short while. If you were uninsured for no more than two consecutive months of the year, you may be qualified for a short gap exemption, and would not have to pay a penalty at tax time.
Some of the exemptions, such as claiming homelessness or experiencing domestic violence, require no documentation. Others, like the eviction or foreclosure exemption, or the utility shut-off notice exemption, require only a copy of such a notice from the last three years.
It’s also important to note that providing false or untrue information on a hardship exemption notice is considered perjury, and may be subject to penalties under federal law.
Hardship exemptions must be mailed to the Health Insurance Marketplace, which makes a determination on your exemption eligibility. There’s even an appeals process that you can file if your exemption claim is denied.
Another exemption is available to those who live in states that did not expand their Medicaid programs under the ACA, and whose income and household size would have qualified them for Medicaid if the state had expanded coverage. To qualify, you must have lived in one of these states at any time in 2016: Alabama, Florida, Georgia, Idaho, Kansas, Louisiana, Maine, Michigan, Mississippi, Missouri, North Carolina, Nebraska, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, Wisconsin, or Wyoming. Your yearly income for 2016 must also have been below 138 percent of the federal poverty level. This exemption can be claimed when filing your 2016 tax returns. More info from the IRS about exemptions, including a handy table of which ones can be claimed at tax time, and which ones may only be granted by the marketplace is here.
There’s even an exemption if coverage is considered “unaffordable” – that is, the minimum amount you would have paid for employer-sponsored coverage or a Bronze level plan is more than a certain percentage of your actual household income. In 2015, the threshold was 8.05 percent. This exemption can be claimed when you file your tax returns.