The Affordable Care Act (“Obamacare”) requires that, subject to some exceptions, all Americans have minimally adequate health insurance coverage. Those that don’t comply with the individual health insurance mandate are required to pay a monetary penalty to the IRS (called a shared responsibility payment). The penalty has been phased in as follows:
The penalty for uncovered children is half that for adults. The penalty amount is prorated if you had coverage for part of the year and is also subject to an annual cap. You’re supposed to pay the penalty along with your taxes when you file your annual income tax return. For more details on calculating the penalty, see the IRS Individual Shared Responsibility Provision – Reporting and Calculating the Payment page.
However, not everyone who fails to obtain health insurance coverage is required to pay the penalty because several groups of people are exempt from the mandate and the penalty. Indeed, recent experience has shown that a majority of those who fail to obtain coverage are exempt.
You may be eligible for an exemption if any of the following apply to you:
The most significant exemptions are based on income. Anyone who would have to pay more than 8.05% of his or her household income to obtain the minimal coverage required by law is exempt. For example, if your annual out-of-pocket cost for the least expensive coverage obtainable through your state exchange is $5,500, you'll be exempt if your household income is less than $68,750. (To determine your out-of-pocket cost, you must subtract the amount of any premium credits for which you qualify.)
You can also apply for a hardship exemption to the mandate if you have experienced difficult financial or domestic circumstances that prevent you from obtaining coverage–for example, homelessness, death of a close family member, bankruptcy, substantial recent medical debt, or disasters that substantially damaged your property. You may also apply for a hardship exemption if obtaining coverage would be so burdensome as to cause you to experience other serious deprivation of food, shelter, or other necessities.
For more details about the exemptions, including an online questionnaire that can help to determine if you qualify for one, see the Exemptions from the requirement to have health insurance page on the HealthCare.gov website.
If you or anyone in your family qualifies for an exemption, you must file IRS Form 8965, Health Coverage Exemptions with your income tax return. You do not need to call the IRS to get this coverage exemption in advance. However, to obtain some types of exemptions, you must first apply through your state health insurance exchange. If it grants your exemption, it will send you a notice with your Exemption Certificate Number to list on your Form 8965. The religious conscience exemption and most hardship exemptions are available only by going to your health insurance exchange and applying for an exemption.
The exemptions for members of Indian tribes, members of health care sharing ministries, and those in prison are available either by going to your state exchange and applying for an exemption certificate or claiming the exemption on your income tax return.
The exemptions for unaffordable coverage, being uninsured for no more than two months, certain hardships, and individuals who are not lawfully present in the United States can be claimed only as part of filing a federal income tax return. The exemption for those under the federal income tax return filing threshold is available automatically—in this event, you do not need to file a return solely to report your coverage or to claim an exemption.
For more details on how to claim exemptions with your tax return, see the IRS Individual Shared Responsibility Provision – Exemptions: Claiming or Reporting webpage.