Penalties for Failing to Have Qualifying Healthcare

Federal taxpayers no longer need to provide proof of health care coverage or explain why they felt they were exempt from having coverage. Note, this applies to federal returns beginning in the tax year 2019. Prior to this, in order for a taxpayer to avoid a penalty on their tax return they must maintain a "qualified healthcare plan" (as defined by the Affordable Care Act or ACA) for the the entire calendar year. All plans purchased in the Marketplace were considered qualifying plans, and most plans offered by employers are considered qualifying plans. Short-term plans or temporary plans did not qualify, and these plans would not help the taxpayer to avoid the federal tax penalty. Before a taxpayer purchased healthcare coverage, they had to make sure that the plan they selected was sufficient for their needs and also allowed them to avoid this penalty.

Insurance providers would send statements to the policy holder following the end of the calendar year which indicated the months which they were covered. Any taxpayers that did not carry coverage all 12 months may incur a penalty on their tax return for the months in which they did not have insurance.

Exemptions From the Health Insurance Requirements

Some individuals did not have to purchase health insurance because they qualified for an exemption. Most of the exemptions are based on income, but you could also qualify for an exemption based on certain life events or other hardships.

You could qualify for an income-based exemption if purchasing a Marketplace plan would cost more than 8.13% of your household income. You could also qualify for an exemption if you're not required to file a tax return because your income is below the level required to file.

Some members of federally recognized Native American tribes were also exempt. Those with religious objections or who were part of a healthcare sharing ministry could also be exempt. These taxpayers previously had to file a form 8965 with their IRS tax return in order to claim one of these exemptions.

Q&A: Do I have to show proof of health insurance when filing my taxes?

Following the Tax Cuts and Jobs Act, federal taxpayers no longer need to provide proof of health care coverage and, if they felt they were exempt from having coverage during the tax year, no longer need to explain why. Note, this applies to federal returns beginning in the tax year 2019.