Life Events

The Affordable Care Act (ACA) is the federal law that reshaped how many Americans obtain and pay for health insurance. Whether you buy coverage on your own, receive it through work, or run a business, several of its provisions can affect you and your taxes.

Key features for individuals

• Coverage rules. Insurers generally cannot deny coverage or charge more based on pre-existing conditions, and plans must cover a set of essential health benefits.
• Young adults. Plans that cover dependents must allow children to stay on a parent's plan until age 26.
• Preventive care. Many preventive services are covered without a copayment when you use in-network providers.
• The Marketplace. You can compare and buy plans through healthcare.gov, typically during an annual open enrollment period or after a qualifying life event such as marriage, birth of a child or loss of other coverage.

Premium tax credits

Depending on your household income and size, you may qualify for a premium tax credit that lowers the monthly cost of marketplace coverage. You can receive the credit in advance, applied to your premium each month, or claim it when you file your return. Because the advance amount is based on your estimated income, you reconcile it on your tax return using Form 8962. If your income turns out higher than estimated, you may have to repay some or all of the excess. If it turns out lower, you may receive more. Report income and household changes to the marketplace during the year so that advance payments stay close to the right amount.

The eligibility rules and income ranges for these credits have been adjusted by Congress more than once, so check irs.gov or ask us for the current rules.

Reporting on your tax return

You will receive Form 1095-A from the marketplace if you had marketplace coverage, and you use it to complete your reconciliation. Employers and insurers also issue forms showing coverage. Keep them with your tax records. Under federal law, there is currently no penalty for lacking coverage, although some states have their own requirements.

What it means for employers

Employers that reach a certain size, counted in full-time-equivalent employees, must offer affordable coverage that meets minimum standards or may owe a penalty, and must file information returns reporting the coverage they offer. Smaller employers are generally not required to offer coverage, and some may qualify for a tax credit when they do. If you are close to the size threshold, careful counting of hours and employees is important. Our business tax services can help with the reporting.

Self-employed taxpayers

If you are self-employed, you may be able to deduct health insurance premiums you pay for yourself and your family, subject to conditions. The interaction between this deduction and the premium tax credit can be complicated, since each affects the other.

Health coverage choices have real tax consequences. Contact our firm and we can help you understand how the rules apply to you.