The Affordable Care Act, also known as Obamacare, consists of two laws, which are the Patient Protection and Affordable Care Act, and the Health Care and Education Reconciliation Act of 2010. Collectively, they extend Medicaid coverage to millions of people, and improve upon Medicaid and the Children’s Health Insurance Program (CHIP).
Under the Affordable Care Act, there are a number of health coverage options for you to explore. And because of the new law, individuals and families do not have to rely on their employer for health insurance.
The Affordable Care Act has many tax implications, including the requirement that you report on your 2014 federal tax return whether or not you and your family had minimum essential health insurance coverage for all 12 months of 2014. If you did not have coverage of any part of the year, and you do not qualify for an exemption, you may be subject to a penalty, which will only increase in subsequent years if you remain without coverage.
If you applied to the Health Insurance Marketplace in 2014, and were covered, then you will receive a Form 1095-A, or Health Insurance Marketplace Statement, from the Marketplace. On Form 1095-A, you can find information regarding your enrollment, and that of anyone in your family, in a health plan via the Health Insurance Marketplace in 2014. It also contains information concerning the amount of the monthly premiums you paid in 2014 to your health plan. In addition, the form shows whether you received any financial assistance that reduced the monthly premiums you paid. This is called the advance premium tax credit (APTC).
Also on Form 1095A is the amount of the premium for the second lowest cost silver plan (SLCSP) applicable to you in 2014. This premium amount is used as a gauge by which to arrive at your premium tax credit. During your application for health coverage via the Marketplace, you are required to provide certain information, including an approximation of your 2014 income. This is used by the Marketplace to determine the premium tax credit for which you are eligible.
Your final premium tax credit may vary from the one that was calculated by the Marketplace, given the information you provided on your application. Another tax form called Form 8962 – Premium Tax Credit, is used to compare, or reconcile, the amount of the APTC with your final premium tax credit.
If your APTC was less than the amount for which you were eligible, the difference will be reflected on your tax return as a credit. If the APTC is greater than the credit for which you were eligible, the difference will be reflected on your return as a deduction from your refund, or as an increase in the amount that you owe.
For more information concerning changes to your 2015 health coverage application and the impact on your taxes, consult a tax professional or accountant.
Authored by Roxanne Minott, LegalMatch Legal Writer and Attorney at Law