Do I qualify for an ACA tax exemption?

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When you or your family, including your spouse, children or other dependents, don’t have health insurance that meets the minimum essential coverage requirements, then you might find yourself facing penalties at tax return time. This tax provision goes by many names, including individual shared responsibility payment, individual mandate penalty, and ACA fine. This requirement also has at least a dozen exemptions.

“Short Gap” Exemption

Without coverage for less than three consecutive months? You probably qualify for the “short gap” exemption. Keep in mind that coverage for just one day of a month counts as being covered for the entire month. For example, if you had insurance for one day in February, no coverage in the months of March and April, and coverage for one day in May, then you would be exempt from penalties for the months of March and April. Be aware that this exemption can only be used once per year and has other limitations.

Group Membership

Some categories of people are exempt from the health coverage requirement and thus from the tax penalty. You are exempt if you are:

  • a member of a health care sharing ministry
  • a Native American tribe member or eligible for Indian Health Services
  • a member of certain religious sects who conscientiously object to insurance
  • serving in the AmeriCorps and have short-term duration or self-funded coverage

Individual Circumstances

If any of the following are true for you, then you likely qualify for an exception. You were or are:

  • incarcerated
  • living abroad 330 or more days in the tax year
  • not lawfully present in the United States
  • living in a state that did not expand Medicaid and you would be eligible for Medicaid benefits under the expansion

Affordability

If your income falls below the IRS’s threshold for tax return filing, then you’re exempt from the coverage requirement. If the cheapest minimum coverage available would cost more than eight percent of your actual or projected income, then you are likely to be exempt from paying penalties for not having coverage.

Hardship

You can apply for hardship exemptions for circumstances that prevented you from obtaining health insurance. More than a dozen specific hardship exemptions are identified, though you can request an exemption for unlisted hardships as well. Hardships include:

  • eviction or foreclosure
  • homelessness
  • domestic violence
  • bankruptcy
  • family member’s death
  • utility shut-off

Note that you can apply for multiple exemptions each year.

Need help determining your eligibility for one of the exemptions? One of HealthSherpa’s licensed brokers will gladly answer your questions or assist you in enrolling for health insurance, so you won’t need to worry about whether you qualify for any of the ACA tax exemptions.

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