I didn’t have health insurance this year because I couldn’t afford it. I don’t think I should have to pay a penalty. What should I do now?
There are several options to consider. Some people with very low incomes are automatically exempt from the individual responsibility requirement. If your income was below the tax filing threshold ($10,400 in 2017 for single taxpayers, $20,800 for married taxpayers who file a joint return), you don’t need to file a tax return and you won’t be assessed a penalty for not having coverage during the year. If you do intend to file a return anyway (for example, to get a refund of any income taxes that were withheld during the year), you will need to include Form 8965 with your tax return and check the box indicating that your income is below the filing threshold.
If your income is above the tax filing threshold, you will have to file a federal income tax return and claim an affordability exemption from the individual responsibility requirement. You can qualify for this exemption if the lowest cost plan that was available to you through the Marketplace in 2017 would have cost more than 8.16% of your household income, taking into account any premium tax credit that you were eligible for. Or, if you were offered coverage by an employer in 2017, you would be eligible for the affordability exemption if your share of the premium for that plan would have cost more than 8.16% of your household income in that year. You can apply for this exemption from the Marketplace before you file your 2017 federal income tax return, or you can apply for it directly on the tax return when you file. Either way, you will need to file Form 8965 with your 2017 federal income tax return.
To apply for an affordability exemption from the Marketplace, in most states you would have to fill out a paper application, providing information about your expected income for the year in which you want the exemption, members of your household, and any employer-sponsored coverage that may have been offered to you. If the Marketplace grants the exemption, you will receive an exemption certificate. Write the exemption certificate number on Form 8965 and include that with your income tax return.
To apply for the affordability exemption directly on your tax return, the instructions for Form 8965 will explain the steps you must follow to determine whether you are eligible. If so, you will enter that information on Form 8965 and include it when you file your income tax return.
There are several other exemptions from the individual responsibility penalty that you may qualify for.