The Affordable Care Act (ACA) includes health care reforms and tax provisions affecting taxpayers, their families, business owners, government entities, tax-exempt organizations, and insurers. Our current law requires the taxpayer to maintain minimum essential health care coverage for himself and his dependents. The exception to maintaining health care coverage is only if the taxpayer has an exemption. Otherwise, the ACA indicates that the taxpayer must make a Shared Responsibility Payment*.
Who is Required to Be Covered?
U.S. Citizens Living in the United States
U.S. Citizens Living Outside of the United States
If the taxpayer could afford health insurance but chose not to comply with the mandate, a fee known as the Shared Responsibility Payment (also known as a penalty) was assessed on the taxpayer’s tax return. The penalty was included on the taxpayer’s return as an additional tax. The instructions for Form 8965 provided information needed to calculate any required shared responsibility payment due under the Affordable Care Act. If the taxpayer or any member of his tax household did not have either minimum essential coverage or an exemption for any month during the tax year, the taxpayer’s shared responsibility payment needed to be calculated and reported on his tax return.
For 2018 the Shared Responsibility Payment was calculated using two methods. The taxpayer was required to pay the higher amount of:
2.5% of the yearly household income for income amounts greater than the filing requirement threshold for the taxpayer’s filing status; or
$695 per person for the tax year 2018 ($347.50 per child under age 18), limited to a family maximum of $2,085.
The TCJA repealed this mandate effective for the tax year 2019. As a result, the 2018 tax year was the last year that the taxpayer was required to calculate and pay the shared responsibility payment.
*A penalty imposed on taxpayers who do not comply with the Affordable Care Act mandate. Generally, if the taxpayer could afford health insurance but chose not to comply with the mandate, they will be assessed a fee (penalty) on their tax return, known as the Shared Responsibility Payment. The penalty is prorated based on the number of months the taxpayer failed to comply.