What is Form 8965- Health Coverage Exemptions?

The Affordable Care Act tax provision will affect federal individual income tax returns filed in 2015 for the 2014 tax year. Form 8965 is used to report a coverage exemption that is either granted by the Marketplace (also called the Exchange) or reported on your tax return. The form is also used to report any shared responsibility payments caused by you, or a member of your household, not having health care coverage or an exemption for that month.

Who must file this form?

If you are required to file a tax return and wish to claim a coverage exemption for yourself or another member of your tax household, the IRS requires you to file Form 8965.  On the other hand, if you are not required to file a tax return, your tax household is exempt from what the IRS calls the “shared responsibility payment” and you do not need to file a return to claim the exemption from coverage.

Premium Tax Credit – This is a tax credit for certain individuals who enroll, or whose family member enrolls, in a qualified health plan offered through a Marketplace.  This particular credit is designed to provide financial assistance to pay the premiums by reducing the amount of tax you owe, giving you a refund, or increasing your refund amount.

Individuals may be eligible if they:

• Are not eligible for other qualifying coverage, such as government-sponsored or certain employer-sponsored coverage
• Are within certain income limits
• Do not file a Married Filing Separately tax return
• Cannot be claimed as a dependent by another person

Individual Share Responsibility Provision

• Most people already have health care coverage and will indicate this by checking a box on the return.
• If you, or any of your dependents, do not have minimum essential coverage or do not have an exemption, you may need to make an Individual Shared Responsibility Payment when you file.
• If you must make an Individual Shared Responsibility Payment, you will owe 1/12^the of the annual payment for each month you or your dependents are without coverage.
• For 2014, the annual payment amount is the greater of:
• 1% of your household income that is above the tax return filing threshold* for your filing status, OR
• Your family’s flat dollar amount ($95 per adult, $47.50 per child, Maximum amount of $285)

Coverage Exemptions

• Individuals who do not have coverage or experience a gap in coverage may qualify for an exemption if
• They do not have access to affordable coverage
• They have a gap of less than three consecutive months without coverage
• They qualify for one of several other exemptions:
• Household income below filing threshold*
• Certain noncitizens
• Members of health care sharing ministry
• Members of Federally-recognized Indian Tribes
• Incarceration
• Members of certain religious sects
• Hardships
• Gross income below filing threshold*
• Two or more family member’s aggregate cost of self-only employee-sponsored coverage exceeds 8% of household income
• Purchased insurance through Marketplace but experience a coverage gap
• American Indian, Alaska Native or a spouse or descendant eligible for services through an Indian health care provider
• Experienced homelessness, eviction, foreclosure, domestic violence, death of a close family member, unpaid medical bills that prevented you from obtaining coverage.
• Do not have access to affordable coverage based on projected income.
• Ineligible for Medicaid solely because the State does not participate in the Medicaid expansion under the Affordable Care Act.
• Your have been notified that your health coverage will not be renewed and you consider other plans unaffordable.
• Exemptions can be obtained in several ways. Some are from the Marketplace in the area where you live, others only from the IRS when you file your return, and others can be obtained from either the Marketplace or the IRS.

If you, or a member of your household, was granted a Marketplace exemption, complete Part I of Form 8965.

If you are claiming a coverage exemption on your tax return, complete Part II or III. You may need to complete more than one part of Form 8965.