Affordable Care Act

What is the Affordable Care Act (ACA)? The ACA – or Obamacare – was passed in March 2010 in an effort to get more Americans covered by health insurance, to improve the quality of coverage, to make it easier to buy insurance, and to lower the cost of coverage. The ACA requires that most Americans carry health insurance. You and your family had until March 31, 2014 to get insurance, or you could face a penalty when you file your taxes.

Does the ACA require everyone to be insured? Most U.S. citizens and legal resident aliens must carry some form of health coverage But: There are certain exemptions that can allow you and your family not to be required to be insured.

If you plan on seeking an exemption, depending on which exemption you plan to claim, you can either file the exemption with your tax return at the end of the year or the Healthcare Marketplace at any time.

Automatic ACA Exemptions

There are a few circumstances where you are automatically exempt you from being insured. If you meet the following requirements, you don’t have to file a claim of exemption.

  • You’re not required to file a federal tax return.
  • You’re a U.S. citizen living abroad for a calendar year, or at least 330 days within a 12-month period.

ACA Exemptions You Must File For

If you meet the requirements for an exemption, you’re not penalized for not having insurance. Here are the various exemptions that apply:

Short-term Coverage Gap: If you’ve went uninsured for less than three months in a row during the year, you won’t face a penalty. Even if you’re only covered one day in a month – like the last day of the month – it counts for the whole month. You can claim this exemption on your return.

Not a U.S. citizen or resident alien: You’re not required to have health insurance. You can claim this exemption on your return.

You are incarcerated. If you are incarcerated in a prison, jail, or other correctional institution after having been sentenced, you’re exempt from having health insurance. You can claim this exemption on either your return or the Healthcare Marketplace.

Enrolled member of federally recognized American Indian or Alaskan Native tribe: You’re enrolled in a qualified Indian healthcare benefit. You can claim this exemption on either your return or the Healthcare Marketplace.

Religious Objections: If you and your family are members of a qualified religious sect whose teachings and beliefs oppose private and public Insurance; you may be exempt from carrying health insurance. The religious sect must have been established by December 31, 1950. The members must have provided for the reasonable medical needs of dependent members for a good portion of the year. You can claim this exemption on the Healthcare Marketplace.

Member of a Healthcare Sharing Ministry: If you are member of a healthcare sharing ministry, you may eligible for an exemption. However, you must meet all the following requirements:

  • The ministry is a tax-exempt non-profit organization
  • The ministry shares a common ethical or religious beliefs on sharing medical expenses among members.
  • You must remain a member of the ministry after you receive medical care.
  • The ministry or its predecessor must have been establishing before December 31, 1999.
  • The ministry must have an annual audit by an independent certified public accounting firm.

You can claim this exemption on your return or on the Healthcare Marketplace.

There are other ways to claim an exemption.

Hardship Exemptions for the ACA

If you’re not covered by health insurance and don’t qualify for any of the other exemptions, there are a few others that might apply to you. The following exemptions are based on either financial or personal hardships you experienced during the year. Financial or personal hardships can range from being unable to pay for the insurance to unexpected natural or man-made circumstances.

Claiming a hardship exemption means that paying for health insurance will deprive you of food, housing, clothing, or other personal or household necessities. You can claim some of the exemptions on your return, but some must be claimed on your health insurance marketplace.

Financial Hardships

If you’re unable to pay for health insurance, you may claim a financial hardship exemption, meaning you wouldn’t have to pay a penalty for not being covered. If one of the following circumstances apply to you, you may be exempt:

  • The healthcare coverage exceeds 8.05% of household income. The percentage is calculated by dividing the monthly cost for insurance by the household’s net income.
  • Your gross income is below the filing threshold for your filing status.
  • Your current health insurance will not be renewed and the alternatives available are currently too expensive for you and your family.

As part of the financial hardship exemption, if the state you currently live in did not expand Medicaid coverage, you may claim an exemption if purchasing insurance would be a hardship.

Personal Hardships

Unexpected things happen during the year that can drastically affect you and your family’s income. If you experienced a personal hardship during the year, you can claim an exemption and not have to pay the penalty for being uninsured. If you experienced one of the following hardships, you may qualify for an exemption:

  • You recently became homeless.
  • You were evicted in the past six months or are currently facing eviction or foreclosure on your home.
  • A close family member has recently died.
  • You were a victim of domestic violence.
  • Your home was damaged due to a recent fire, flood, or other natural or man-made disaster.



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