The Affordable Care Act, or Obamacare, is an individual mandate that requires all eligible Americans to have some form of basic health coverage. Those without insurance will receive a penalty when they file their tax returns – that is, unless they have an exemption.
The article below is accurate for your 2017 taxes, the one that you file this year by the April 2018 deadline, including a few retroactive changes due to the passing of tax reform. Some tax information below will change next year for your 2018 taxes, but won’t impact you this year. Learn more about tax reform here.
Income and affordability
If your income is so low that you aren’t required to file a tax return, then you're automatically exempt from the penalty. For example, if a single taxpayer’s income in 2017 was less than $10,400, there typically was no need to file a return; for married couples, the cutoff was $20,700. Even if you do file a return—to claim a refund, for example, or because you are self-employed and earned enough money to require it—you're still exempt from the insurance requirement if your income is below the cutoff.
You're also exempt from the requirement if the most inexpensive coverage you can find would cost you more than 8.16% of your 2017 household income.
Membership in certain groups qualifies you for an exemption from the coverage requirement. The law specifically exempts:
• Members of federally recognized Indian tribes. The Interior Department currently recognizes 566 Native American and Alaska Native groups.
• People eligible to receive care from the federal Indian Health Service
• Members of health care sharing ministries. These are religious-based organizations whose members pledge to pay one another's medical bills.
• Members of recognized religious groups that object to insurance for religious reasons. The objection must be to all forms of insurance, including social insurance programs such as Social Security and Medicare, not just health insurance or Obamacare.
Exemptions based on legal status
You're exempt from the requirement if you are not "lawfully present" in the United States or if you are incarcerated. U.S. tax laws apply to everyone who earns income in the United States, regardless of whether they're here legally. Illegal or undocumented immigrants are required to file tax returns if their income is high enough, but they are exempt from the coverage requirement. They are also barred from obtaining health insurance through the online insurance marketplaces set up under the Affordable Care Act.
People who are incarcerated—in jail or prison—are exempt. This applies whether you have been convicted and are serving a sentence or are being held awaiting trial.
The law makes hardship exemptions available for people whose current situation makes it too difficult to afford health insurance. These are not permanent exemptions—they last until you can get "back on your feet." Common situations that may qualify you for a hardship exemption include:
• Eviction or foreclosure
• Fire, flood or other disaster that caused major damage to your home
• Receiving a notice that your electricity, water or other utility service will be shut off
• Death of a close family member
• Being a victim of domestic violence
• Losing health insurance and being unable to find affordable coverage
• High debt from medical bills
• High expenses for caring for a sick, disabled or aging family member
Note that these are not the only hardships that may qualify you for an exemption. The government will make a decision on each application for a hardship exemption based on the specific information in the application.
All you need to know
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