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How Health Care Reform Will Affect Your 2014 Taxes (The Ones You File On April 15, 2015)

The Affordable Care Act (also known as the ACA) was signed into effect in 2010, but 2014 marked the first year most Americans were required to have health insurance. As the year comes to a close, what does this mean for you?
12/10/2014 10:33am ET | Updated February 9, 2015
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The Affordable Care Act (also known as the ACA) was signed into effect in 2010, but 2014 marked the first year most Americans were required to have health insurance. As the year comes to a close, what does this mean for you?

The most important change that will affect Americans is proving whether they are insured or exempt from having health insurance on their tax returns. For the nine out of ten taxpayers who already have health insurance through their employers, Medicaid, or Medicare, proving whether you have health insurance will be as easy as answering a few simple questions and checking a box on your tax return.

So what do I need to report?

The amount employers pay for employer-sponsored group health plans will be reported on employees W-2 forms.

It's important to note that while employers are required to report it, the amount doesn't affect an individual's tax liability and the employer's contribution to the health plan will not change the taxable income amount. Your employer or insurance provider may also provide a new form called a Form 1095-B or 1095-C, but it is not required to be reported on these forms in 2015.

If you purchase insurance through the Health Insurance Marketplace you will see a new form, Form 1095-A, which will show details of your insurance coverage like the effective date, amount of premium, and the advanced premium tax credit.

I wasn't insured this year, what can I do?

If you didn't have health insurance in 2014, you can check if you are eligible for an exemption. There are a number of reasons someone may be exempt including: financial hardship, if your income is below the federal tax filing threshold, if you had medical expenses you couldn't afford or are a member of a tribe or religious group. To find out if you're exempt, there are free tools like the TurboTax Exemption Check that will help you understand if you qualify for an exemption and help you apply.

There are few exemptions that you can qualify for through your tax return like your income being lower than the IRS filing threshold, you were uninsured less than three months, and you're not lawfully present in the U.S.

Most exemptions require you to apply before you file your taxes since you'll need to include an exemption certificate number on your return. This can take several weeks to receive so it's important to get started right away if you think you're exempt and to potentially save money come tax time.

I wasn't insured and I'm not exempt from the penalty.

If you were uninsured for longer than three months and don't qualify for an exemption, you'll most likely face a tax penalty when you file your 2014 taxes.

There are a few ways this penalty is calculated -- in 2014, you'll either pay a percentage of your household income (one percent) or a flat fee ($95 per adult, $47.50 per child) whichever is higher. If you are required to pay a percentage of your income, the maximum penalty is the national average premium for a bronze plan. If you're required to pay the flat fee, the maximum penalty per family is $285.

If you didn't purchase insurance by the open enrollment deadline, our TurboTax calculator can help estimate how much tax penalty you may incur on your 2014 taxes.

Reconciling Changes in Projected Income

Another change you could see when you file your taxes is if you purchased health insurance in the Health Insurance Marketplace and received an advanced premium tax credit or subsidy to help you pay for your insurance, the amount you received in advance will be compared to the actual amount you should have received based on your actual household income. In this case, you could end up with a bigger tax refund, a lower one or a balance due since your subsidy (premium tax credit) for 2014 was based on your projected household income.

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