Frequently Asked Questions about Healthcare and Your Taxes

healthcare insurance and taxesBecause of changes initiated by the Affordable Care Act, your healthcare costs during the year now affect your taxes more than they ever did before. Below are some of the most frequently asked questions with regard to healthcare and income taxes to help you prepare your 2015 return.

1. Am I required to have health insurance?

Under the ACA, most people are required to purchase health insurance or pay a penalty. However, if you have low household income or you qualify for a hardship exemption, you may not have to pay the penalty for failing to buy health insurance.

2. What happens if I don't buy health insurance?

If you are required to purchase health insurance under the ACA but you don't have any, you will owe a penalty for every month you didn't have health insurance during the year. The amount of the penalty depends on the number of months for which you didn't have health insurance, the tax year and the size of your family.

3. What forms will I receive if I had health insurance during the year?

Depending on the specifics of your situation, you may receive Form 1095-A, 1095-B or 1095-C. Form 1095-A comes from the Health Insurance Marketplace, Form 1095-B comes from health insurance companies and Form 1095-C comes from employers who provide self-insured coverage.

4. When will I receive these forms?

healthcare insurance and tax prepFor the 2015 tax year, you should receive Form 1095-A by February 1, 2016. Forms 1095-B and 1095-C should be received by March 31, 2016.

5. What information do I need to include on my tax return?

In order to complete your income tax return, you may need to know which months you were covered, what you paid for health insurance policy, the price of your second lowest cost silver plan and the amount of advance tax credit you received, if any.

6. Does the ACA require me to file an income tax return?

If you received an advance premium tax credit or enrolled in a health insurance plan through the Marketplace you will need to file an income tax return. You should also complete a tax return if you think you may qualify for a credit that you didn't receive during the year.

7. What if I don't receive the forms I need?

If you don't receive the forms you were expecting, you can still complete your tax return using your insurance cards, statements from your insurance company, records of advance premium credits and other documents. You can also request a copy of any forms you didn't receive by contacting the issuer.

Healthcare Tax Issues on the Rise

There are a number of tax issues surrounding healthcare that have recently taken center stage. The state of Colorado has proposed, and decided to vote on a single payer healthcare system, which would make it the first state to provide free healthcare for residents. This would be a huge move for the state, which under these provisions would allow residents to choose their healthcare providers, with all expenses paid by the state. Although this is a bold move, a 10 percent payroll tax raise has also introduced to offset the $25 billion a year cost of implementing this program. To pay for state coverage, employers would incur a 6.67 percent payroll tax fee, with employees paying 3.33 percent.

healthcare coverage in coloradoThis comes on the heels of the individual mandates for those who don’t currently carry health insurance. The upcoming tax year will affect a number of individuals who chose not to purchase health insurance will incur an individual shared responsibility payment. This will be an item on the federal tax return for the year in which coverage was not obtained. The fees for this penalty are calculated in two different ways:

  • It will be 2.5% of the household income; or
  • $695 per person, with $347.50 for each child under 18

To pay these taxes under the percentage method, the part of the household income above the yearly tax filing threshold will be counted. The people who will be affected under the per-person method are the individuals who do not currently carry health insurance in the household.

For those individuals who have had coverage for some part of the year, the fees associated will be 1/12 of the amount for each month the insurance has lapsed. Fees are deducted from the federal tax refund, or fees will be paid with the return for the year.

The tax penalties for healthcare coverage will continue to rise with each passing year as an incentive for individuals to sign up for healthcare. Consulting with a personal tax accountant or tax accounting service can help with your healthcare taxes for the current and upcoming year.