Penalty Exemption #1: Qualified Health Plans
According to the Affordable Care Act (ACA), anybody who has a qualified health plan is exempt from paying the penalty. A qualified health plan can be one of the following:
- ACA (on/off-marketplace) Plan
- Group Health Plan
- Medicare
- Medicaid
- CHIPs
- V.A.
- Medi-Share
- Plans for Alaskan natives and American Indians
Penalty Exemption #2: Qualifying Events
Unlike those with qualified coverage, those with no coverage or non-qualified coverage, such as a short-term medical plan or fixed indemnity plan, are subject to the penalty. However, being subject to the penalty and being responsible for paying the penalty are completely different. Several factors determine whether someone must actually pay the penalty. For instance, some people can submit a written application for an exemption to Healthcare.gov. Once submitted, Healthcare.gov determines whether someone qualifies for an exemption. If eligible, then Healthcare.gov sends a written notice that can be filed with a person’s taxes.
There are several ways to qualify for an exemption. To see if you are exempt, take the exemption screener. For a complete list of qualifying circumstances, visit Healthcare.gov or look below:
- Homelessness
- Eviction or foreclosure
- Shut-off notice from a utility company
- Domestic violence
- Death of a family member
- Fire, flood, or other natural or human-caused disaster that caused substantial damage to your property
- Bankruptcy
- Medical expenses that resulted in substantial debt
- Unexpected increases in necessary expenses due to caring for an ill, disabled, or aging family member
- Having a child as a tax dependent who’s been denied coverage for Medicaid and CHIP for 2016, and another person is required by court order to give medical support to the child. Under this particular circumstance, you are exempt from paying the penalty for the child.
- Eligible for enrollment in a qualified health plan (QHP) through the Marketplace, lower costs on your monthly premiums, or cost-sharing reductions for a time period when you weren’t enrolled in a QHP through the Marketplace in 2016
- Ineligible for Medicaid because your state didn’t expand eligibility for Medicaid in 2016 under the Affordable Care Act
- “Grandfathered” individual insurance plan (a plan you’ve had since March 23, 2010 or before) was cancelled because it doesn’t meet the requirements of the Affordable Care Act and other Marketplace plans are unaffordable
- Other hardships may exempt individuals from the penalty. Fill out this form to apply for an exemption.
Penalty Exemption #3: Income Level
If a qualifying event doesn’t exempt you, then your income may. For instance, you’re exempt if the annual premium of the lowest cost bronze plan in your county is 8% or higher than your adjusted gross income. Again, you’ll be subject to the penalty, but your income may exempt you from having to pay it. For help calculating an income exemption to the penalty, reach out to a tax professional.
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