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Affordable Care Act Reminders for Tax Year 2016 Returns

December 13, 2016


Though the new Congress and Administration may substantially change the requirements for the Affordable Care Act, its current provisions remain in place for 2016 returns.

As we approach the beginning of the 2017 filing season here are some reminders about the Form 1095-A, exemptions from the requirement to have health insurance, and the increase in the individual penalty (individual shared responsibility payment) amount for 2016 federal income tax returns.

Importance of Form 1095-A
The Form 1095-A (Health Insurance Marketplace Statement) will be received by approximately 10 million individuals that obtained their 2016 health insurance at the Federal or a State Marketplace.

This form is needed in order to complete the 2016 Form 8962 (Premium Tax Credit) which calculates their Premium Tax Credit for 2016 and, for those who received a subsidy, to complete the reconciliation of the subsidy with the actual credit.

The 1095-A should be received:

  • For those who used the Federal Marketplace – throughout January but no later than January 31, 2017
  • For those who used a State Marketplace – Early February 2017

A copy of the Form 1095-A will be available online for those who used the Federal Marketplace via their account on healthcare.gov in January 2017. It may also be available online for those who used a State Marketplace.

Also, any taxpayer that received a subsidy must complete the Form 8962 and include it with their 2016 federal tax return. If it is not included with the original federal return the processing of the tax return may be delayed.

Health Care Coverage Exemptions
Most individuals who did not have health insurance for all or part of 2016 probably qualified for an exemption. Therefore, it is important that before any penalty is calculated that an individual determines whether they may qualify for a health care coverage exemption.

If an individual qualifies for a health care coverage exemption they must complete the applicable parts of the 2016 Form 8965 (Health Coverage Exemptions) and include it with their 2016 federal tax return.

To see a full listing of the exemptions and whether the applicable exemption must be applied for at the federal Marketplace or can be requested when the 2016 federal return is filed, see the Health Care Exemptions section of the How the Affordable Care Act Affects Individuals on the Crosslink Tax Resource Center.

If an individual needs help determining whether they qualify for an exemption, a Find Exemptions tool is available on the healthcare.gov website.

Individual Penalty (Shared Responsibility Payment) for 2016
If it is determined that an individual does owe a penalty for Tax Year 2016, it is calculated as the greater of:

  • 2.5% of the individual’s income that exceeds their 2016 filing threshold (personal exemptions plus standard deduction for their filing status):

Or

  • A flat dollar amount that is assessed for the taxpayer, spouse, and dependents as follows:
    • $695 per taxpayer, spouse, and dependents over age 18
    • $347.50 for each dependent under age 18
    The maximum family flat dollar amount for 2016 is $2,085

The penalty amount is limited for 2016 to the annual national average premium for a bronze level health plan available through the Marketplace, which is $2,676 per individual ($223 per month per individual), with a cap of $13,380 for a family with five or more members ($1,115 per month).

See pages 15 - 19 of the 2016 Form 8965 instructions for more information on how the penalty is calculated.

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