The Obamacare mandates become effective on our 2014 tax returns.
The Affordable Care Act (Obamacare) requires that you have health coverage that meets the law’s requirements by 2014 or pay a penalty. Your spouse and dependents must also be covered or you may be subject to a penalty. However, there are 33 exemptions from the penalty you may qualify for. When you meet your tax professional or do your own return you will need to know whether your family members had qualifying coverage on a month-by-month basis.
Qualified health plans need to meet standards set by the government. You’ve probably read of thousands of people who’ve had to search for qualifying coverage after their plans got canceled.
If you purchased health coverage on an exchange such as Covered California, you probably received a subsidy or credit toward your insurance premium based on your estimated income for 2014. When you do your return you must match the advanced credit to the actual credit based on your actual income to determine whether a portion of the credit needs to be repaid or whether you are entitled to an additional credit. Income for the purposes of the premium credit includes the income of your spouse plus dependents.
If you are an employer not offering health coverage you will want to check the regulations to see whether you are subject to a penalty.
Starting in 2015, if you are an employer or individual who provides health coverage to others you will be required to report the coverage on official IRS forms to the individuals and the IRS.
Beginning in 2018, there will be an excise tax of 40 percent of the amount by which an employee’s health coverage exceeds certain amounts. Most people affected by this tax will be the higher management of corporations or certain union members.
There are also additional taxes to help pay for the costs of the Affordable Care Act. The net investment income tax (NIIT) of 3.8 percent applies to individuals, estates and trusts with income over certain thresholds. There is also another 0.9-percent Medicare tax on wages and self-employment income over certain thresholds.
We’re slowly finding out what was in the 2000-page Affordable Care Act. You will want to review the instructions closely before filing Form 8965 (coverage and exemptions) and Form 8962 (premium tax credit).