Exemptions from the Individual Shared Responsibility Provision of the Affordable Care Act

The 2014 tax year is the first year in which the individual shared responsibility provision the Affordable Care Act (ACA) requires households to maintain minimum required coverage or pay the shared responsibility tax penalty. The ACA does include certain exemptions from the individual shared responsibility provision which could benefit taxpayers. Shown below a partial list of the most common exemptions under this ACA provision:

  • Unaffordable coverage – The cost incurred by the taxpayer for the lowest cost Marketplace plan or partially employer-sponsored coverage available is more than 8% of the taxpayer’s annual household income.
  • Short coverage gap – The taxpayer went without coverage for less than three consecutive months during the year. Taxpayers with multiple gaps exceeding three months are only allowed an exception for the first gap period.
  • Household income is below the minimum return filing threshold.
  • Certain noncitizens – The taxpayer was neither a U.S. citizen, U.S. national, nor an alien lawfully present in the U.S. during the tax year.
  • Health care sharing ministry member – The taxpayer was a member of a health care sharing ministry, which is a tax-exempt organization whose members share a common set of ethical or religious beliefs and have shared medical expenses in accordance with those beliefs continuously since at least December 31, 1999.
  • Indian tribe membership – The taxpayer was a member of a federally-recognized Indian tribe, or is otherwise eligible for services through an Indian health care provider or the Indian Health Service.
  • Incarceration – Taxpayers was in a jail, prison, or similar penal institution or correctional facility.
  • Members of certain religious sects – The taxpayer was a member of a religious sect that has been in existence since December 31, 1950, and is recognized by the Social Security Administration as conscientiously opposed to accepting any insurance benefits, including Medicare and social security.
  • Hardships. In general, an event or condition that prevents an individual from obtaining minimum essential coverage, such as
    • The taxpayer is ineligible for Medicaid solely because the state in which the individual resides does not participate in the Medicaid expansion under the Affordable Care Act.
    • The taxpayer purchased a qualified health plan through the Marketplace during the initial open enrollment period, but the coverage is not effective until April 1 or later.

If you’d like to further discuss how you might fit into one of the individual mandate exemptions, please call for an appointment.