What is Form 8965, Health Coverage Exemptions, Really All About?
Okay, let’s talk about Form 8965. It sounds scary, but it’s not as bad as it seems. It’s all about whether you’re required to have health insurance under the Affordable Care Act, also known as the ACA, or Obamacare. You may have heard of the individual mandate, which was essentially a requirement to have health insurance. While that penalty has been reduced to zero by 2019, you may still need to file this form to confirm you qualified for an exemption from the requirement to have coverage for all or part of the year. Let’s break it down to see if this form might apply to you.
Understanding the ACA and the Individual Mandate
Before we dive into Form 8965, let’s briefly talk about the Affordable Care Act (ACA) and the individual mandate. The ACA, enacted in 2010, was designed to make health insurance more accessible to everyone. One key part of the law was the individual mandate, which required most U.S. residents to have health insurance that met certain requirements. If you didn’t have qualifying coverage, you were required to pay a penalty when you filed your federal taxes, known as the shared responsibility payment.
Now, the tax penalty for not having health insurance was reduced to zero starting in 2019. However, if you did not have coverage, or you need to prove you had a qualifying coverage, Form 8965 might still be relevant. Let’s move on to exemptions and Form 8965.
Health Coverage Exemptions: What Are They?
Even though most people were required to have health insurance, the ACA provided a range of exemptions for people with special circumstances. If you were eligible for an exemption, you were not required to maintain health coverage, even with the individual mandate in place. There are different kinds of exemptions, and these are the ones that you can claim on Form 8965.
Exemptions come in various forms. Some common categories of exemptions include:
- Income-based exemptions: If your income was below a certain threshold, you might qualify for an exemption. This threshold varies depending on your filing status and family size.
- Hardship exemptions: If you experienced a hardship that made it difficult to obtain health insurance, such as homelessness or eviction, you might be eligible for an exemption.
- Coverage gap exemptions: If you had a gap in coverage for less than three consecutive months, you also may qualify for a short-coverage gap exemption.
- Religious exemptions: Members of certain religious groups who have beliefs that oppose health insurance might be eligible for an exemption.
- Specific living circumstances: If you were incarcerated, or were a member of a federally recognized tribe, or eligible for services through an Indian Health Services provider, you could qualify.
- Health Care Sharing Ministries (HCSM): If you belong to a recognized HCSM, you are considered exempt.
Who Needs to File Form 8965?
Now, here’s where Form 8965 comes into play. If you believe you qualify for a health coverage exemption for the tax year and didn’t have health insurance for all or part of the year, you may need to file this form with your federal income tax return.
Here’s a simple breakdown:
- You didn’t have health coverage: You, or someone in your family that you are claiming, didn’t have qualifying health insurance for all or part of the tax year.
- You think you qualify for an exemption: You meet one of the eligibility criteria for an exemption from the individual mandate.
- You need to demonstrate you have an exemption: Even if there’s no longer a penalty for lack of coverage, you may need this form to show that you had a qualifying reason for not having coverage.
If all three of these points apply to you, then it’s likely that you need to fill out and file Form 8965 with your tax return.
How Does Form 8965 Work?
Form 8965 is designed to help you claim the right exemption. It consists of different sections that help you show you qualify for an exemption. Here’s a look at the main parts:
- Personal Information: As with any tax form, you will start by providing your name, address, and social security number or tax identification number. This is critical to making sure the IRS knows who is claiming the exemption.
- Part I: This part of the form is for claiming a health coverage exemption through the health insurance marketplace.
- Part II: This section is for claiming an exemption because of certain hardship, coverage gap, membership in a federally recognized tribe, health care sharing ministry, religious objection, or other circumstances.
- Part III: Here you will list your full-year exemptions, such as if you were incarcerated or a member of a recognized tribe or received care from Indian Health Services, among other reasons.
- Part IV: If you received an exemption from the Marketplace, you’ll enter the exemption certificate number.
You’ll need to go through the specific instructions on the form or online, and carefully review the criteria for each type of exemption. You’ll select the reason you believe you are exempt. Sometimes you will need to provide documentation to support your exemption claims, for example, a confirmation of enrollment with a health care sharing ministry or a letter from the health insurance marketplace.
Common Mistakes and Misconceptions About Form 8965
It’s important to avoid these common mistakes when filling out Form 8965:
- Assuming You Don’t Need it Because there is no penalty: Even though the penalty for not having health insurance is currently zero, you still need to prove you had an eligible reason to not have coverage.
- Not Carefully Reviewing the Exemption Criteria: Each type of exemption has specific requirements. It’s essential to carefully review these requirements to make sure you’re eligible before claiming an exemption.
- Forgetting to Attach Required Documentation: If you are claiming a marketplace exemption, it’s important to include any necessary certificates or other supporting documentation to validate your exemption.
- Mixing Up Exemptions: Certain exemptions are claimed via the Marketplace, and others are claimed directly on Form 8965. Make sure you are using the correct form.
- Not Seeking Professional Advice When Needed: If you are unsure about your eligibility or the correct procedure for claiming an exemption, it’s best to consult with a qualified tax professional.
Tips for Filing Form 8965
Here are some tips to help you correctly file Form 8965:
- Gather Your Information: Have all relevant information handy, including your social security number, income details, and any information related to your exemption.
- Read the Instructions Carefully: The IRS provides detailed instructions for Form 8965. Read these instructions carefully and completely before starting the form.
- Use the Correct Form: The IRS regularly updates their forms, so make sure you are using the most current form for the tax year you’re claiming an exemption for.
- Seek Help if Needed: Don’t hesitate to seek help from a tax professional or the IRS if you have questions.
- Keep a Copy: Always keep a copy of your filed tax form for your records.
Related Concepts and Terms
Understanding these related terms will help you better navigate Form 8965 and the ACA:
- Affordable Care Act (ACA): The healthcare reform law that required most Americans to have health insurance.
- Individual Mandate: The provision in the ACA that required individuals to have health insurance or pay a penalty. (Now eliminated at the federal level.)
- Shared Responsibility Payment: The penalty for not having health coverage under the ACA.
- Health Insurance Marketplace: An online platform where people can shop for health insurance plans.
- Qualifying Health Coverage: Insurance that meets the minimum essential coverage requirements under the ACA.
- Tax Filing Status: The way you are filing your taxes, for example, Single, Married Filing Jointly, Head of Household.
Final Thoughts
Form 8965 can seem like a maze, but by understanding the basics, you can confidently fill it out correctly. If you didn’t have health coverage for part or all of the year and you qualify for an exemption, you might need to file it. And if you’re ever in doubt, don’t hesitate to seek professional help!