The Affordable Care Act and Your Tax Return
The Affordable Care Act, known by many simply as Obamacare, is the new healthcare law that requires individuals to purchase health insurance on their own if they do not have insurance provided by an employer. Americans without employer-based insurance may qualify for tax credits that offset the costs of complying with this law. If you did not claim your credit in order to get reduced monthly premiums, you may receive a tax refund for any amount you did not already use. Alternatively, if you did not have health insurance for most of the year, you could face a penalty at tax time.
How the Affordable Care Act Affects Tax Refunds
The Affordable Care Act can affect your tax refund in two ways. People who opted not to get insurance at all may face a tax penalty. You might pay a reduced penalty if you were uninsured for only part of the year. The amount owed will depend on your income and the number of uninsured people in the household. This will be taken out of any tax refund that may be due.
If you had health insurance for at least 10 months of the year, you will not have to pay a penalty. You might actually receive a larger tax refund if you did not take advantage of reduced monthly premiums. If you chose not to claim the tax credit at the time you applied for insurance, you still might be able to claim this refundable credit on your tax return. The amount of the credit will depend on your income, your household size, and the cost of your marketplace premiums. If you did not get health insurance through the marketplace, your premiums may not qualify for the credit since only certain plans are available through the program.
Filing Taxes with the Affordable Care Act in Mind
Because the health tax credit can be used to pay for some out-of-pocket expenses in addition to deductibles, be sure to have all your financial information that relates to these health care costs with you when you file your tax return. You will need to know which health care plan you have and how much the premiums cost. You may also need information about your copayments and coinsurance.
If you file taxes yourself, most online tax programs will guide you through the process of reporting these costs and determining whether you qualify for the tax credit.
If your tax credit was paid directly to your insurance company to lower your monthly premiums, you likely received your total credit throughout the year. However, if you did not use the full amount you qualified for over the course of the year you might receive a partial refund to make up the difference.
The Affordable Care Act has created a few additional steps when filing taxes, so be sure you provide all related information accurately so that you can receive the full credit you might be due or pay the penalty you owe.