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An Overview of Exemptions from ACA Penalties

Your 2014 tax return will be the first time you are required to report your health insurance coverage.  Although much of the news coverage related to ACA has been about coverage, subsidies and penalties, little attention has been given to the numerous exemptions that are available to avoid penalties for not having “minimum essential coverage” (MEC).

There are 19 different exemptions, and this advisory will not go into detail about each, but rather the process for determining and documenting eligibility for an exemption.

Exemptions From the Exchange (Connect for Health Colorado):
A total of 9 exemptions are available by applying through Connect for Health Colorado. Of these 9, 5 of them can only be obtained by going through the Colorado Exchange.  These include certain hardships and if someone is a member of a religious sect that is conscientiously opposed to accepting insurance benefits.  Once granted, the Exchange will provide an Exemption Certificate Number (ECN), which will need to be disclosed on the tax return.  If you qualify for one of these exemptions, time is of the essence to start the application process to avoid delaying the filing of your 2014 tax return.

Exemptions Claimed on Your Tax Return
A total of 14 exemptions can be claimed when you file your income tax return.  Of these 14, 9 of them can only be claimed on your tax return.  These include exemptions for living outside the US, income below certain thresholds and having a short coverage gap.  Although these exemptions are easy to claim, they are obviously subject to verification by the IRS.

Exemptions Available Through the Exchange or Your Tax Return
If you have followed the math thus far, it becomes apparent there is some overlap among the 19 available exemptions.  That is because there are 4 exemptions that can be obtained from the Exchange or by claiming them on your tax return.  These include being a member of an Indian tribe, a health care sharing ministry, or being incarcerated.  For these exemptions that are relatively easy to document, the IRS doesn’t want to hold up your tax return awaiting the exemption from the Exchange.

For further information click on the links below
Individual Shared Responsibility Provision - Minimum Essential Coverage

Instructions for Form 8965 & Types of Coverage Exemptions

If you have further questions, do not hesitate to call us to discuss your specific situation.


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