The Affordable Care Act and Your 2015 Taxes (Part One)

Part One: I Had Insurance in 2015 It’s tax time again, and it’s the second year people will see changes to their income tax filing because of the Affordable Care Act (ACA). This is the first of our now-annual two-part blog series on the ACA and taxes, focusing on taxpayers who had health coverage in 2015, and Part Two will focus on taxpayers who did not have health insurance for all or part of 2015.

One of the ACA’s key components is that most Americans are required to have health insurance, or else pay a tax penalty. This requirement, known as the “individual mandate,” means that individuals are required to have qualifying health coverage during the year, whether they purchased it themselves, had a health plan through their job, or received health coverage through other means (such as Medicare, Medicaid, CHIP, veteran’s health care, etc.). Tax forms have changed a little bit to reflect the health coverage requirement.

If an individual did not have coverage throughout the year, they must either qualify for an exemption from the requirement, or pay a fine when filing their taxes. We’ll cover those situations in Part Two.

What you need to know

Like last year, most taxpayers who had a health insurance plan for all of 2015 will simply need to check a box on Line 61 of their Form 1040, U.S. Individual Income Tax Return.

New forms for employer-coverage, Medicaid, and CHIP

This year, if a person had healthcare coverage from their employer they will receive a 1095-B form, which describes who was covered on the plan, and in which months during 2015. Individuals will also receive a 1095-C that describes what coverage was available to the employee and their spouse/dependents and the cost of the coverage (even if they chose not to enroll).  Most people who are enrolled in employer-based insurance can just keep these forms for their records and can just check the box as described above.

People who received Medicaid or the Children’s Health Insurance Program (CHIP) during the year will also receive a 1095-B from the Texas Health and Human Service Commission (HHSC) describing which months they were enrolled.

If you had Marketplace Coverage

Taxpayers who enrolled in a health plan through the Marketplace will receive a Health Insurance Marketplace Statement (new IRS Form 1095-A). Like a W-2 or Form 1099, this form provides information needed to file taxes. Specifically, the form provides the amount of financial assistance the person received to help pay for their Marketplace plan.

More than 80 percent of the people who signed up for coverage on the Marketplace for 2015 received financial assistance through a premium tax credit to pay for their plan. Most people received this credit in advance, in the form of a subsidy to lower their monthly premium bills. The amount received as a subsidy was based on their projected income. Using their actual income and the 1095-A, taxpayers will complete Form 8962 to determine whether they actually qualified for a larger tax credit than they received, or if they underestimated their income and got too large a credit and owe the IRS. Individuals who qualified for a larger credit will receive this as an increase to their tax refund, or a credit toward any taxes owed.

Excess premium tax credits are paid back either as a reduction to a person’s tax refund or if they are not entitled to a refund, individuals can pay the taxes back online, by phone, or by mail.  The IRS also offers payment options to pay over time for individuals who cannot pay all at once.

Where to Get Help

This is meant only as a high-level overview of the ACA’s impact on tax filing. For more information about how health care will impact taxes go to www.Healthcare.gov/taxes or www.irs.gov/Affordable-Care-Act. The Center on Budget and Policy Priorities also developed the “The Tax Preparer’s Guide to the Affordable Care Act” which provides detailed information on the ACA impact to taxes.

To learn more about free tax assistance and filing options available for low and moderate income taxpayers go to www.IRS.gov/freefile and www.IRS.gov/VITA.