Obamacare and Your Tax Return
Filing taxes just got a bit trickier due to the Affordable Care Act.
2014 was the first year Americans were required to have health insurance under the Affordable Care Act, better known as Obamacare. And, since the IRS is the government agency chosen to enforce the rules, you’ll see changes on your 2014 tax return.
If you’re among the majority of Americans who gets health insurance through an employer, all you’ll have to do is check a box on the tax form.
If you didn’t have coverage, though, and don’t qualify for one of a slew of exceptions, you’ll owe a penalty. Check out the exceptions in the instructions for IRS Form 8965. The same form is used to figure the penalty if you owe it.
Even more complications are in store for the millions of Americans who purchased health insurance through an exchange and received a subsidy to help pay for it. Those subsidies were based on an estimate of the family’s income for 2014. And, tax return time is the time to compare that estimate to the family’s actual income. If your estimate was too high, your subsidy was too low and the difference will be added to your tax refund for the year.
But, if your income estimate was too low, you may have received a bigger subsidy than allowed. And now is the time to pay back the difference, via a smaller tax refund or a check to the IRS. This reconciling process is done on IRS Form 8962.
This process is especially complicated because in this case, income is not only your own income and that of your spouse if you’re married; it also includes the income of any dependents. So, if one of you children got an unexpected summer job that pushed up family income above your estimate, you might be required to pay back part of the subsidy now.
The rules are very complicated so be sure to read the instructions carefully, follow the directions in tax software if you use it, or seek professional help.
Wondering just how well you know the ins and outs of the Affordable Care Act? Take the Obamacare quiz to find out.