There are so many things you need to take into consideration when doing your taxes. From your income to your deductions, there are a lot of boxes to check off and ducks to get into a row. One thing you don’t want to forget about, though, is your health benefits. Depending on your situation they could have a major impact on your taxes.
At Hacker Accounting, we know how confusing tax law can be. And over the last few years it’s gotten even more complicated. How your health benefits can affect your taxes has changed greatly since the passing of the Affordable Care Act. If you want to know how your health benefits could be affecting you, read on.
The Affordable Care Act requires that all U.S. citizens and their dependents obtain health insurance. If you don’t have insurance, you will have to pay a tax fee. Known as the Individual Shared Responsibility Payment, you’ll have to pay at the time you file your tax return. According to current law, the payment will be phased in over three years: 2016 is the third year.
If you end up owing this tax fee, the payment can be done in one of two ways:
- Flat Fee: You can pay a flat fee. For 2015 the Flat Fee was $325.00 for adults and $162.50 per child under the age of 18. The fee may change during this tax season.
- Percentage of Household Income: This step requires a little extra math. It’s 2% of your taxable income over the minimum filing amount for your filing status, but not over the average cost for the Bronze level health plan available through the government’s Marketplace coverage.
Which payment method you’ll have to use depends on which amount is higher. Whichever of the two methods has a higher fee is the one you’ll have to pay.
You may be eligible to file for an exemption for your tax payment. It depends on whether any of the following factors is true for you:
- You’ve been insured for less than three months of your tax year.
- You don’t need to file a return because your income is too low.
- You’re part of a recognized religious group with objections to health care coverage
- The lowest price coverage for you and/or your family would cost more than 8% of your annual income.
- You are incarcerated.
- You’re a Native American who is eligible for services through an Indian Health Services provider.
You can also qualify for an exemption if you file for a hardship exemption. This exemption exists for people who’ve had to deal with debilitating or extraordinary circumstances that make it hard for them to fulfill this financial obligation. To qualify for the hardship exemption, you must be dealing with one of the following issues:
- Got a shut-off notice from your utility company.
- Have filed for bankruptcy in the last six months.
- Been a recent victim of domestic violence.
- Suffered extensive property damage due to a fire, flood, or other natural or human-caused disaster.
- Had medical expenses that you couldn’t pay in the last 24 months which have resulted in substantial debt.
What If I Already Have Health Insurance
If you already have insurance, you can file your taxes as normal. So long as you have coverage through your employer, a private company or a government program like Medicare or veteran coverage there’s no need to make any adjustments to your tax. If you have private health care coverage that isn’t through an employer, however, you should check out the government health plans to see if you can get a better deal.
Need help filing your business taxes? Give Hacker Accounting a call at 602-375-5251.