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Health Insurance — It’s on Your Tax Return

Do you have health insurance? Many self-employed people don’t. But all Americans are “supposed” to have it now.

Actually they were “supposed” to get it by March of last year. Did you?

There’s a new form on the tax return. If you have insurance, and had it for all of 2014, and did not use a government subsidy, and that is true for all members of your family who are on your tax return, then it’s just a “yes” check box as long as the policy you had met the government’s standards. This will be true for most people who have insurance through an employer.

If you didn’t have insurance, it wasn’t a ‘qualifying” plan, you didn’t get it until after January 1, or you got a subsidy to help pay for it … you’ve got some work to do.

  1. Did you get it through the exchange?   If so, you should have gotten a form in the mail with your contract number and other information that you will fill out on the return. Do not throw this form out. Save it for your tax return with your other tax-related documents. (Note—if you didn’t get insurance through the exchange, you won’t get this form. Next year you will get a form no matter where you got your insurance.)
  1. Did you move or otherwise change your mailing address since you got the insurance? If so, contact the insurance company or the Healthcare Marketplace if you got it through the exchange and update the address. Ask them to re-send the insurance form, if it didn’t get forwarded to you (most tax documents don’t forward; I don’t know if this one will or won’t.).
  1. Did you apply for Medicaid through your state? This one is a bit dicey. If you applied, and got coverage, and had it all year, then you can just say “yes” you had coverage. But what if you didn’t get approved, or didn’t get approved until later in the year? You will need to indicate which months you were and were not covered, and then request an exemption to the penalty (you do this right on the tax return) on the grounds that insurance was unaffordable to you for those months.
  1. Did you do nothing? You didn’t get insurance, you didn’t apply for insurance, you didn’t apply for Medicaid? You may have a penalty to pay. It will be based on a percentage of your taxable income – but only if you have taxable income. If your total income is under about $10,000 for a single person, no penalty will be assessed.
  1. Some of you who don’t have other income than from mystery shopping will have to file a tax return just to report a 1099, even if only to prove your expenses rendered it non-taxable. If your total income falls under the threshold, there won’t be a penalty, but you may still need to fill out the form requesting the exemption on that basis.

So why am I not giving the form numbers and other detailed information to help you? Because this is not a good year to Do It Yourself when it comes to the tax return. Even tax preparers are going to struggle with this, but at least they know where to look for help.

I have no idea how Turbo Tax will handle the “interview” for this. But if you don’t understand the questions, you won’t know how to answer them. And you will definitely need that form I mentioned under point 1.

One note – if you do it yourself using software, be careful not to double dip the itemized deduction for health insurance. If you fill out one of the new forms and tell it what you paid for insurance, it may feed it directly to the Schedule A. So don’t claim it twice. Probably they will be looking for that to happen.

2015 is now the second year of the “Individual Mandate.” If you didn’t get insurance last year, get it this year. Or budget for an increasing penalty when you do your 2015 tax return.

Some will choose to pay the penalty rather than participate in something they don’t agree with. Some may not realize that insurance can be affordable in the short term through the Exchange. Some may not know if they qualify for Medicaid through their state. Some may be in that donut hole between qualifying for their state’s Medicaid and qualifying for the exchange because their state refused to expand Medicaid to cover low-income adults with no children – and they can’t get insurance at all without paying half of their meager income for a private plan at full price. (I know two people who are stuck in that insurance-less limbo.)

Figure out where you are and either take advantage of the program, or plan to pay the penalty. Entirely your choice, I’m just trying to help make you aware of the options and requirements.

And consider using a tax preparer, if you haven’t done so before. I tried to figure this out on my own just to see if it was possible just to follow the instructions, and the forms are NOT intuitive AT ALL. After I got my own form in the mail, it made more sense, but I’m still working my way through the process. My software has six new forms and worksheets to deal with the various aspects of this new tax. It will probably take ten times dealing with this before I’ll really feel secure that I’m understanding it. (I won’t understand some of the options until I actually do a return that uses them.)

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Editors Note: This is not professional tax advice, and might not apply to your unique circumstances. Please consult a tax professional.

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