Affordable Care Act Reminders for Tax Year 2016 Returns

Though the new Congress and Administration may substantially change the requirements for the Affordable Care Act, its current provisions remain in place for 2016 returns.

As we approach the beginning of the 2017 filing season here are some reminders about the Form 1095-A, exemptions from the requirement to have health insurance, and the increase in the individual penalty (individual shared responsibility payment) amount for 2016 federal income tax returns.

Importance of Form 1095-A

The Form 1095-A (Health Insurance Marketplace Statement) will be received by approximately 10 million individuals that obtained their 2016 health insurance at the Federal or a State Marketplace.

This form is needed in order to complete the 2016 Form 8962 (Premium Tax Credit) which calculates their Premium Tax Credit for 2016 and, for those who received a subsidy, to complete the reconciliation of the subsidy with the actual credit. Read more

Health Care Coverage Exemptions

Most individuals who did not have health insurance for all or part of 2016 probably qualified for an exemption. Therefore, it is important that before any penalty is calculated that an individual determines whether they may qualify for a health care coverage exemption.

If an individual qualifies for a health care coverage exemption they must complete the applicable parts of the 2016 Form 8965 (Health Coverage Exemptions) and include it with their 2016 federal tax return. Read more

Individual Penalty (Shared Responsibility Payment) for 2016

If it is determined that an individual does owe a penalty for Tax Year 2016, it is calculated as the greater of:

• 2.5% of the individual’s income that exceeds their 2016 filing threshold (personal exemptions plus standard deduction for their filing status);
  Or
• A flat dollar amount that is assessed for the taxpayer, spouse, and dependents as follows:
• $695 per taxpayer, spouse, and dependents over age 18
• $347.50 for each dependent under age 18

The maximum family flat dollar amount for 2016 is $2,085. Read more

Click here to read the entire CrossLink Tax Update that includes further information about the Form 1095-A, exemptions from the requirement to have health insurance, and the increase in the individual penalty amount for 2016 federal income tax returns.