Your Health Insurance Choice May Affect Your Tax Refund
There are 3 ways that your tax refund can be affected by your health insurance choice.
1. If you and your family have qualified health insurance.
You would just need to report on your tax form that you had qualifying insurance.
2. If you received help from the government to pay for your health insurance.
If you received the Advance Premium Tax Credit your tax return will be affected. When filing a tax return you need to report it so the credit can be applied to your account.
If you under reported your income you may have to pay back some or all of you credit that you received. That means instead of getting a refund you may owe taxes or get a smaller refund! On the other hand if your income was less than you thought you might get a bigger refund.
3. If you don’t have any health insurance.
If you don’t have any health insurance, a penalty or exemption may be applied.
To find out if you qualify for an exemption, go to HealthCare.Gov and sign up for a marketplace account. When you sign up, you will find out if you qualify for an exemption. You might even find you qualify for low costs on coverage.
- There are about 20 different exemptions, including hardship exemptions.
- Some exemptions require documentation, some don’t.
If you plan to apply for an exemption, don’t put it off. Waiting could slow down your tax refund. You have to fill out a form and wait for confirmation number before you can report the exemption.
If you don’t qualify for an exemption, you will have to pay a penalty (called Individual Shared Responsibility):
For 2014, the Individual Shared Responsibility is $95 per adult and $47.50 per child with a cap of $285 per family or 1% of your income, whichever is greater.
For 2015, the Individual Shared Responsibility jumps to $325 per adult and $162.50 per child with a cap of $975 per family or 2% of your income, whichever is greater.
What Happens If I Didn’t Pay the Penalty?
You will have to make an Individual Shared Responsibility payment on your income tax return for each month you didn’t have coverage.
What Happens to my Tax Refund If I Decide Not to Pay the Penalty?
The only way for the IRS to collect the penalty for not having health insurance is for them to withhold the money from your tax refund.
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