How the Affordable Care Act will Affect Individuals and their Tax Return

This page will provide you with information on how the Affordable Care Act (ACA) will affect taxpayers for Tax Year 2016. It covers the following topics:

Open Enrollment Dates for 2017 Health Insurance Coverage

For individuals who did not have health insurance for all or part of 2016:

For individuals who purchased their health insurance through the federal or a state marketplace:

Additional Information Links for the Affordable Care Act

Open Enrollment for 2017 Health Insurance Coverage
The open enrollment period for obtaining or renewing health insurance plans purchased through the federal or a state Marketplace for 2017 will begin on November 1, 2016 and end on January 31, 2017.

Health Coverage Exemptions
Individuals who do not have health insurance for all or part of 2016 may qualify for an exemption from the requirement to have health insurance. If they receive an exemption, they will not be subject to the individual shared responsibility payment (penalty).

How you apply for an exemption depends on the type of exemption. A few exemptions must be applied for through the Marketplace via However, most exemptions may be requested when the 2016 federal return is filed.

Regardless of which type of exemption an individual receives or is requesting, they must complete Form 8965 (Health Coverage Exemptions) and include it with their 2016 federal return. If an exemption is granted by a Marketplace an Exemption Certificate Number is issued and must be included on Form 8965, Part I.

Marketplace Only Exemptions

Can Only Request When Filing Federal Return

  • Coverage is considered unaffordable
  • Short coverage gap
  • Two or more family members’ aggregate cost  of self-only employer sponsored coverage is more than 8% of household income
  • Member of Health Care Sharing Ministry
  • Members of Federally Recognized Indian Tribe
  • Incarcerated
  • An American Indian, Alaska native, or a spouse or descendant of either who is eligible for services through an Indian Health Care provider

See the following for more information:

What to do if a Taxpayer’s Circumstances Change during 2016
If an individual received an advance premium tax credit (subsidy) to help pay for their 2016 health insurance through the federal or a state marketplace, it is important to remember that it was based on their income from a prior year. In order to ensure that the advance payments closely match the premium tax credit amount that will be calculated on their 2016 federal return, the taxpayer needs to report any significant changes in their income or any change to their family size to the Marketplace if it occurs during 2016. This will allow the marketplace to adjust the subsidy amount in order for the individual to avoid having to pay some of it back when they file their 2016 federal income tax return in 2017.

For more information, see the Report Changes in Circumstances to the Marketplace Health Care Tip on the IRS website.

Advance Premium Tax Credit (Subsidy)
Approximately 85% of individuals who purchased their 2016 health insurance through the federal or state Marketplace will receive an advance premium tax credit (subsidy) that reduces the amount they pay for their monthly health insurance premiums.

Who is eligible for an Advance Premium Tax Credit?
An individual is eligible to receive an advance premium tax credit (subsidy) if they purchase their health insurance through a Marketplace and their income is between 100% and 400% of the Federal poverty level.

How is the Advance Premium Tax Credit (APTC) Calculated by the Marketplace?
The APTC (subsidy) is calculated by the Marketplace based on an estimate of the individual’s income for 2016 and their family size. The income estimate is usually based on the income reported on a prior year tax return, usually for 2014 or 2015.

Based on the individual’s income and family size, the APTC is calculated as follows:

  • Determine the annual premium the taxpayer will have to pay (expected contribution).
  • Look up what the total 2016 premium is for the Marketplace’s second lowest cost (silver) level coverage (benchmark plan).
  • The subsidy amount is then calculated as the difference between the “benchmark plan” premium and the individual’s expected contribution.

For more information see the Premium Assistance Subsidy page on

How will an individual know what their total Advance Premium Tax Credit was for the Year?
Early each year, everyone who purchased their insurance through a Marketplace will receive a Form 1095-A (Health Insurance Marketplace Statement). This statement will contain the following information that the taxpayer will need in order to complete Form 8962 (Premium Tax Credit):

  • Who was covered in the household;
  • Monthly Premium Amount, Second Lowest Cost Silver Plan Monthly Premium Amount, and Monthly amount of any Advance Premium Tax Credit they received.

For more information and to see questions and answers regarding Form 1095-A, see the Health Insurance Marketplace Statements page on the IRS website.

Premium Tax Credit and Form 8962
Any taxpayer who received an advance premium tax credit (subsidy) during the current year must file a federal income tax return for that year and reconcile the calculated Premium Tax Credit with the amount of subsidy they received. If the taxpayer does not, then they can be denied an advance premium tax credit in subsequent years.

Form 8962 (Premium Tax Credit) does two things for those who purchased their health insurance at the federal or a state Marketplace:

  • Calculates the Premium Tax Credit for the year based on the income and family size reported on their current federal return
  • Reconciles the advance premium tax credit (subsidy) that the individual received during the year with the calculated Premium Tax Credit for the current tax year.

The result will be one of the following:

  • If the taxpayer did not receive a subsidy they will receive a refundable credit.
  • For those who received a subsidy the result will be:
    • A refundable credit if the premium tax credit is greater than the subsidy amount
    • An additional tax if the subsidy amount is greater than the premium tax credit

If the result is a refundable credit, the amount will carry to Form 1040, line 69.

If the result is an additional tax, the amount will carry to Form 1040, line 46.

For more information see the following on the IRS website:

Individual Shared Responsibility Payment (Additional Tax for Not Having Health Insurance)
An additional tax (penalty or individual shared responsibility payment) will be included on an individual’s current year federal tax return if they (or any member of their family) do not have health insurance coverage for at least nine months during that year, or if they qualify for or have already obtained a health coverage exemption.

The penalty for 2016 (which has risen substantially) 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)


  • A flat dollar amount that is assessed for the taxpayer, spouse, and dependents as follows:
    • $695 for 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

If the additional tax is owed it will be included on Form 1040, line 61.

See the following for more information:

Additional Links for More Information on the Affordable Care Act

Recent Tax Updates

Reminder of the Federal Refund Delay for Upcoming 2018 Filing Season
Dec 13, 2017

Preparer Due Diligence Requirement Expansion Reminder
Nov 30, 2017

PTIN Renewal and Last Day to File a Return Electronically
Nov 13, 2017

Hurricane Relief Tax Law Changes
Nov 1, 2017

Important Upcoming IRS Update to e-Services Accounts
Oct 10, 2017

Tax and Financial Relief Options for Flood Victims
Sept 5, 2017

Warning to Tax Preparers of New Phishing Scam that is Attempt to Steal Passwords
Aug 8, 2017

IRS Security Summit Launches “Don’t Take the Bait” Education Campaign Aimed at Tax Preparers
Aug 1, 2017

IRS Announces Which ITINs Will Be Expiring at End of 2017 and That They Are Now Accepting Renewal Applications
July 27, 2017

IRS Use of Private Debt Collection Agencies
June 20, 2017

Additional Updates
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