Your cost for Marketplace health insurance is based on the income you file on your tax return. Your reported income also determines your eligibility for the tax credits and penalties associated with Marketplace health coverage. Everyone has to have health insurance and by filing your taxes, you let the government know if you carry health insurance. The tax system acts as a way for the government to levy a penalty on those who don’t have it and to provide assistance, by means of a tax credit, to those who do.
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.
Minimum essential coverage
The Affordable Care Act mandates that everyone must share in the responsibility for health insurance. Your income tax return helps the government monitor your coverage. Minimal essential healthcare coverage can be acquired through one of the following venues:
- Health insurance through the healthcare Marketplace
- Health insurance coverage through your employer
- A government-sponsored program such as Medicare or Medicaid
- A health insurance policy directly from an insurance company
- Coverage under a plan that is approved by the Department of Health and Human Services
Remember, for healthcare options and eligibility information, visit TurboTax.com/health-care.
Modified adjusted gross income
If you choose to purchase a health plan through the Marketplace, you’ll need to estimate your household’s gross income. This is referred to as your modified adjusted gross income and includes all income from all sources including your spouse, if filing married. This amount should reflect your income on your tax return. It determines your eligibility for lower-cost health insurance premiums. When filling out the Marketplace application, include:
- Salaries and wages, including tips
- Social Security payments
- Net income from self-employment and business income
- Alimony payments
- Unemployment payments
Individual shared responsibility provision
If you choose not to purchase health insurance coverage, you’re required to make an individual shared responsibility payment with your tax return. The annual payment is determined as a percentage of the declared amount of income on your tax return or a flat dollar amount. The 2017 individual shared responsibility payment is calculated as the greater of:
- A family flat dollar amount, which is $695 per adult and $347.50 for each child, with a maximum amount of $2,085, or;
- 2.5 percent of your household income above the threshold of your filing status.
The amount is capped at the national average of the Marketplace’s bronze level premium.
Not sure if you are exempt from the tax penalty or from the requirement to purchase health insurance? The TurboTax Exemption Check, is a free, online tool to help determine whether you might be eligible to waive the tax penalty entirely and apply for a health care exemption.
Premium tax credit
You may be eligible to receive a premium tax credit if you obtain your health insurance from the Marketplace. This credit is to assist with monthly premium payments and is determined by the information on your tax return. To be eligible you must:
- Buy your health insurance through the Marketplace
- Be ineligible for a plan offered by the government or your employer
- Not be claimed as a dependent by another person
- Be within certain income limits
- Not have filed as married filing separately, except under certain circumstances
TurboTax can help you determine if you meet the eligibility requirements.
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