2014 Income Tax Impact of the Affordable Care Act (ACA) in a Nutshell


By: Cindy Toran, MBA, BA

Affordable Care Act ACAThe Affordable Care Act (ACA), also known as Obamacare, will add a new level of complexity in preparing 2014 U.S. Income Tax Returns. Massachusetts taxpayers are familiar with state reporting requirements to verify coverage on their MA individual tax returns, however, the ACA criteria includes anyone:

  • Covered through the Marketplace, or
  • Claiming an exemption from health insurance coverage, or
  • Who had no coverage for any month out of the year.

Are new tax forms required with the Affordable Care Act in effect?

Yes. The following new tax forms may be required:

  • Form 1095-A, Health Insurance Marketplace Statement (issued by Marketplace insurer by 1/31/15)
  • Form 8965, Health Coverage Exemptions (file with 2014 tax return)
  • Form 8962, Premium Tax Credit (file with 2014 tax return)

Simplest Case with the Affordable Care Act:

Taxpayers whose entire household had qualifying health coverage for each month of their tax year will simply check a box on their federal income tax return. No further action is required.

Affordable Care Act Health Coverage Exemption(s):

If anyone in the taxpayer’s household did not have coverage for any month of the year and claims an exemption, Form 8965 will need to be attached indicating the individual’s name, Social Security number, and exemption type or reason. Exemptions include:

  • Cost of coverage exceeding 8% of household income*
    • A coverage gap of less than 3 consecutive months
    • Household income below threshold for filing a tax return
    • Coverage gap at the beginning of 2014 when purchased coverage through the Marketplace
  • Religious exemption*
  • American Indian or Alaska Native
  • Ineligible for Medicaid because your state does not participate in expansion under the Affordable Care Act*
  • Hardship, including foreclosure, unpaid medical bills, death of a close family member, eviction, domestic violence, abandonment*
  • Incarceration
* Exemption Certificate Number required from Marketplace

Shared Responsibility Payment (SRP)

If anyone in the taxpayer’s household had no coverage for any month and no exemption, the Shared Responsibility Payment (SRP) is calculated and paid as follows, allocated monthly. Form 8965 includes a worksheet to assist in the calculations.

The Shared Responsibility Payment for 2014 is the greater of:

  • 1% of the household income above the filing threshold based on filing status, or
  • $95 per adult and $47.50 per child under age 18, with a maximum of $285.

The Good News

Massachusetts residents may be familiar with the state-level penalty for not having health insurance. The good news is, if you have to pay the federal penalty (Shared Responsibility Payment), you may not have to pay the full Massachusetts penalty.

According to the Massachusetts Department of Revenue, if the federal penalty is greater than the state penalty, then no state penalty is due. If the state penalty is greater, then the amount due to the state is the difference between the two.

Premium Tax Credit and Advanced Payments

If anyone in the taxpayer’s family enrolled in a health plan through the Marketplace and received advance credit payments, Form 8962 must be completed to reconcile the advance credit payments (which was based on an estimate) with the actual premium tax credit. If no advance credit payment was received, Form 8962 will calculate the amount of credit due to you, which will be claimed as a tax credit on your tax return. Generally you will be eligible for a premium tax credit for 2014 if your household income is 100% to 400% of the federal poverty line in the 48 contiguous states:

affordable care act aca healthcare

Summing up the Affordable Care Act

Your 2014 tax reporting due to the ACA may be quite simple, or it may be very complex. This is just a synopsis. For more information, visit the Affordable Care Act Information Center on our website or feel free to give us a call.

What about your thoughts?

Do you have any thoughts, questions or concerns regarding the Affordable Care Act? Please feel free to leave your comments below or post to on our FacebookGoogle+ or LinkedIn pages.

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For more information, call Alex Franch at 781.789.7200. WorthTax has locations in Norwell, Dedham, and Weymouth, Massachussetts.
Alex Franch

Mr. Franch is a Tax Specialist and Partner at Joseph Cahill & Associates / WorthTax. He has a diverse background including a Bachelor of Science from Boston College in Mathematics and extensive military service. Mr. Franch is an Enrolled Agent and has eight years of tax preparation experience. He has been serving individuals, families, and businesses for several years with tax and financial planning strategies and is a junior partner with the firm. Mr. Franch is licensed by the Financial Industry Regulatory Authority (FINRA) with a Series 6, 63, 65, and 7, and by the Commonwealth of Massachusetts Division of Insurance.