Not many people get excited with the thought of filing their income taxes, especially this year when the Affordable Care Act is in place. If you are unsure of how this will affect your taxes, you are not alone. It is overwhelming for all of us, even those in the tax field. We are all learning together this year!
The Patient Protection and Affordable Care Act (ACA) aims to increase the quality and affordability of health insurance, lower the uninsured rate by expanding public and private insurance coverage, and reduce the costs of healthcare for individuals and the government.In regards to taxes, the ACA can be broken down into digestible basics. If you were adequately covered by insurance last year, the law shouldn’t affect your taxes negatively, and for tax payers with employer sponsored coverage, it really won’t affect you at all. However, here are a couple things to consider as you prepare to file your taxes this year:
Individual Mandate: The Individual Mandate required most Americans to have qualified health insurance as of January 1, 2014. Coverage could be obtained through employer-sponsored plans, government programs such as Medicare or Medicaid, private plans or through the new federal or state marketplaces, also called health insurance exchanges. If you had insurance throughout the entire year, you will simply have to answer “yes” to a question on your tax return.
Premium Tax Credits: Tax credits were available to qualifying individuals who didn’t have access to employer-provided coverage and purchase health insurance through a marketplace. Eligibility and amounts are based on the cost of marketplace premiums and household size and income. You will need to report the following situations to the IRS through your tax return.The credit could be paid directly to the health insurance company to help cover monthly payments.
Tax Penalties for the Uninsured: If you didn’t have health insurance for a total of 3 or more months in 2014, you may be subject to a penalty payable on your tax return. The amount is based on the number of uninsured individuals in your household and household income.
Exemptions: If you were uninsured and plan to claim an exemption in order to avoid the penalty, you need to file an exemption application immediately. You may qualify for an exemption if:
*If your application is accepted, you'll be issued an exemption certificate number (ECN). Since you must report your ECN on your tax return, don't wait to apply - doing so could delay processing of your tax return and your tax refund!
Additionally, it wouldn’t be tax season if we didn’t mention the importance of tax credits -- especially the Earned Income Tax Credit (EITC). Not only do credits reduce the amount of your tax liability, they can also lead to a larger refund.Visit MontanaFreeFile.org to find these free tax sites in your community and to make an appointment with a VITA volunteer, trained to maximize your refund at no cost. And visit MCUCD’s website each week throughout January as we discuss tax season basics and delve deeper into the Affordable Care Act what that means for your taxes this year.
Click here for the entire January CRC outreach package to share with your members, clients, and community.
Montana Credit Unions for Community Development (or MCUCD) is the award-winning, charitable arm of the Montana Credit Union Network. A state-wide nonprofit organization, MCUCD works together with the state's credit unions to improve the lives and financial independence of all Montanans.