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Your Complete Guide to Form 8965 — Health Coverage Exemptions

Your Complete Guide to Form 8965 — Health Coverage Exemptions - TaxACT Blog

What you need to know about Form 8965

Did you know that if you weren’t covered by a qualified health insurance plan last year you could face a penalty when filing your tax return?

Fortunately, you may qualify for one of the many exemptions available.

While some of the exemptions require you to apply through the Marketplace (also known as an exchange), others can be claimed without submitting an application by filing IRS Form 8965 along with your income tax return.

What is Form 8965, and who needs to file it?

IRS Form 8965, Health Coverage Exemptions, is the form you file to claim an exemption to waive the penalty for not having minimum health insurance coverage.

Anyone filing a tax return who does not have qualifying health care coverage must file Form 8965.

If you have coverage through your employer, buy insurance through a Marketplace or use private insurance, you do not need to file Form 8965.

If you are not required to file a tax return because your income is too low, you also do not need to file Form 8965.

If you don’t have coverage and you don’t qualify for any exemption, the worksheet for Form 8965 is used to calculate your penalty (the TaxACT program will do this automatically for you).

Some exemptions are as easy as checking a box on your return.

If your household or gross income is below the filing threshold and you are not required to have health insurance coverage, you don’t need to provide additional documentation or an exemption code when filing your return.

TaxACT will analyze your income level and check the appropriate box on your return if needed.

TaxACT reports exemptions on your return with a special code

TaxACT reports an exemption code on Form 8965 for the following exemptions:

  • Short coverage gap – being without insurance for less than three months in 2014 (for 2015, it’s two months without insurance)
  • Unaffordable premiums, defined as the minimum amount you must pay that would be more than 8 percent of your household income
  • Unaffordable premiums, defined as two or more family members’ aggregate cost of self-only, employer-sponsored coverage or the cost of any available employer-sponsored coverage for the entire family would be more than 8 percent of your household income
  • Living abroad more than 330 full days during a 12-month period, or living as a resident of another country
  • Living in the U.S. as neither a citizen or U.S. national, nor as an alien lawfully present in the U.S.
  • Membership in a health care sharing ministry
  • Membership in a Federally recognized Indian tribe
  • Incarceration, including being in a jail, prison or similar facility
  • Enrollment in certain types of Medicaid and TRICARE programs not considered to be minimum coverage (2014 only)
  • Eligibility for coverage under an employer plan, which you did not purchase, that started in 2013 and ended in 2014 (2014 only)
  • Purchase of insurance through the Marketplace during initial enrollment period, but with a gap in coverage at the beginning of 2014
  • Successful application for Children’s Health Insurance Program (CHIP) coverage during initial enrollment period, but with a gap in coverage at the beginning of 2014
  • Membership in a Federally recognized Indian tribe

You need approval from the Marketplace to take these exemptions

Some exemptions must be granted by the Marketplace.

To claim the following exemptions, you must apply for and receive an Exemption Certificate Number (ECN) that must be reported on your tax return (and therefore, makes you exempt from paying the penalty):

  • Membership in a health care sharing ministry
  • Membership in a Federally recognized Indian tribe
  • Incarceration, including being in a jail, prison or similar facility
  • Membership in certain religious sects
  • Eligibility for services through an Indian health provider, as an American Indian, Alaska native, or spouse or descendent of either
  • Circumstances that prevent you from getting coverage
  • Lack of access to affordable coverage based on household income
  • Ineligibility for Medicaid solely because you live in a state that does not participate in Medicaid expansion under the Affordable Care Act
  • Nonrenewal of your health insurance policy and you consider other plans unaffordable

To receive your exemption and ECN, you must fill out a form available on HealthCare.gov.

After you sign and mail the form along with any required documentation, expect to hear back within two weeks.

However, it can take much longer than that if the marketplace has questions or needs more information.

Therefore, allow plenty of time to apply for an ECN before you want to file your tax return.

Note that certain exemptions require both approval from the Marketplace and a code for the exemption, but other exemptions require only one or the other.

If you apply for an exemption but it is denied, don’t give up. You have 90 days from the date you receive the denial notice to appeal the decision.

File only one Form 8965 per household

While you must claim a coverage exemption for each individual in your household, you can report all exemptions for yourself and your family members on one Form 8965.

Your household includes yourself, your spouse, and anyone you claim (or could claim) as a dependent on your tax return.

If you are a dependent on someone else’s return, you don’t need to worry about the penalty or filing Form 8965.

TaxAct makes preparing and filing your taxes quick, easy and affordable so you get your maximum refund. It’s the best deal in tax. Start free now or sign into your TaxAct Account.
About Sally Herigstad

Sally Herigstad is a certified public accountant and personal finance columnist and author of Help! I Can't Pay My Bills, Surviving a Financial Crisis (St. Martin's Griffin). She writes regularly at CreditCards.com, Bankrate.com, Interest.com, RedPlum, and MSN Money. She is an experienced speaker and a member of Toastmasters International. Follow Sally on Twitter.

Comments

  1. Harlan Sensenig says:

    I have current ACA Act exemption for myself and all members of my household under the ” certain religious sects provision”. Our youngest son was born following the 2015 year tax period. How do I receive an exemption # for him or, do I just amend current form to include him before filing 2016 tax return?

    • Hi Harlan, You need to resubmit the Religious Sect Exemption Application and include your son. Once it gets approved each tax household member will receive an Exemption Certification Number (ECN) that should be reported on Form 8965. Click here for the link to the application and click here for a link to the application instructions. Thank you!

  2. Cynthia Solesbee says:

    I noticed that the exemption of having income below the 138% Poverty level and living in a state that didn’t expand medicaid wasn’t mentioned as an option to select on the tax return. I’ve asked IRS if this exemption would be on the 2015 return, and they said it was still being decided. Has the IRS decided not to include this exemption on the 2015 return?