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Thursday, February 25, 2016

Health Insurance and 2015 Taxes: A Quick Guide

Kara Nester

Policy Analyst

This is the second year that everyone who files taxes must indicate whether they have health insurance.  Depending on their coverage status, some people may also need to supply additional information. These relatively new steps in the tax filing process are the result of the Affordable Care Act’s individual mandate, the requirement that most Americans have health insurance.

As part of their year-round work, enrollment assisters are fielding questions from consumers about taxes and health insurance. Here’s what assisters and individuals should know this tax season to ensure households are accurately completing all health insurance tax requirements.

Everyone is required to report their health insurance status on their taxes

The good news is that this process is straightforward for most people. The majority of Americans have health coverage and many will simply have to check a box to indicate that they have it. Those who do not have health insurance must either pay a fine or claim an exemption from the requirement (more on that below). This is all done through the tax filing process.

The new health insurance tax requirements are a bit more complex for those who received financial assistance (premium tax credits) to help them pay for their marketplace health plans. These individuals must take additional steps when filing their taxes.


See our infographic for an overview of the steps each type of tax filer must take this year.

People who have health insurance 

People who have insurance will receive a form showing what type of insurance they had for the preceding year. These forms, known as a Form 1095-A, 1095-B, or 1095-C, are similar to a W-2 in that they contain important information for a tax filer to reference but the forms do not have to be submitted to the IRS. Which form someone receives depends on the type of health coverage he or she has.

  • Employer-sponsored health insurance: Most Americans under the age of 65 receive health insurance through an employer. These people will be provided with a Form 1095-B or 1095-C from their (or their spouse’s) employer. Please note, 1095-B and 1095-C filers do not need to wait to receive these forms to file. In fact, some employers might be very slow to give them to employees this year.
  • Medicare, Medicaid, or CHIP: More than 30 percent of Americans have health insurance coverage through Medicare, Medicaid, or the Children’s Health Insurance Program (CHIP). These individuals will receive Form 1095-B. People who have Medicaid or CHIP will receive the form from the state agency that oversees Medicaid and/or CHIP, and individuals with Medicare will receive a 1095-B from Medicare. 
  • Marketplace health insurance: People enrolled in marketplace health coverage (through HealthCare.gov or their state-based marketplace) for all or part of 2015 will receive a 1095-A from their marketplace. The form will be sent in the mail and will also be available to most consumers online through their marketplace accounts. This form contains information about their coverage and information they need to report regarding the advanced premium tax credits (APTCs) they received the previous year. 

Double-check tax forms for accuracy: All individuals who receive a 1095-A, B, or C should check their form for accuracy and should keep the form on file. If a form is incorrect, the individual should report changes to their employer, their state Medicaid or CHIP agency, Medicare, or the marketplace. As we noted, this form does not need to be submitted with the individual’s taxes, but information it contains should be kept on file. Only individuals who receive Form 1095-A will need to wait to receive this form before filing taxes.  

Had health insurance in 2015? Don’t forget to check the box.
People covered for the full year through any of these sources of insurance should check a box on their taxes labeled “Full-year coverage.” The exact line on the form will vary depending on which type of federal income tax form the filer submits. Last year, approximately 74 percent of taxpayers simply checked this box to report health insurance reporting requirements.

People who receive financial assistance through the marketplace

Consumers who received APTCs will see the amount of tax credits they received on their 1095-A. This information is necessary to complete Form 8962, Premium Tax Credit, which is used to “reconcile” their APTCs. Those who received APTCs must reconcile the amount of APTCs they received (based on their estimated income for the year) with what they were ultimately eligible to receive (based on their actual income for the year). 

Form 8962 will determine whether adjustments to the amount of tax credits an individual received are necessary. For example, if an individual’s income is less than they projected it would be, they will likely get additional tax credits when they file taxes. Those who have a higher income than originally projected will likely repay excess tax credits during tax filing. Individuals will report the underpayment or overpayment on their federal tax return. 

Even if they don’t usually file taxes, all individuals who received APTCs are required to file taxes and attach Form 8962. For the 2014 tax season, 21 percent of those receiving APTCs failed to attach this form, so it’s important to remind people about this requirement. Tax filers who did not receive tax credits in advance but want to see if they’re eligible for premium tax credits for the past year can do so by filling out an 8962 as well. 

Assister tip: When you work with consumers who owe a lot of APTCs back at the end of the year, encourage them to take less of their premium tax credit in advance. Taking only a portion of their tax credit in advance can protect consumers from having to pay back large amounts during tax time.

People who don’t have health insurance

The vast majority of tax filers will follow the steps outlined above because they had health coverage for the year. Those without health coverage will have pay a fine or apply for an exemption when submitting their tax returns. Last year—the first time the individual mandate was in effect—approximately 6 percent of tax-filers paid a fine for not having coverage and another 9 percent claimed exemptions.

Exemptions: Automatic exemptions are given to people who are not required to file taxes because their income falls below the tax filing threshold. These individuals will not need to pay a penalty or file Form 8965 for not having health coverage. 

For other individuals, exemptions can be claimed for a variety of reasons, such as: 

  • Not being able to obtain health insurance that is considered affordable
  • Being ineligible for Medicaid solely due to a state’s decision not to expand Medicaid

Those claiming an exemption will submit Form 8965, Health Coverage Exemptions, with their tax return. Most exemptions can be claimed right on the tax return. However, there are a few types of exemptions that have to be applied for through the marketplace and then claimed on taxes

Paying the fine: Individuals who are paying the fine for not having coverage will make the payment on their federal tax return under the “Other Taxes” section (or corresponding section). The amount will vary depending on family size, income, and the length of time an individual went without coverage. Online tax software will guide consumers through calculating the amount of the fine. Consumers can also use the worksheet on Form 8965 to determine the amount of the fine. 

For more assistance

Those with questions about the above processes can visit a local tax professional or an in-person health insurance assister