Figuring the Affordability Exemption

Size: px

Start display at page:

Download "Figuring the Affordability Exemption"

Norah James
5 years ago
Views:

1 Figuring the Affordability Exemption The affordability exemption is figured for taxpayers who did not have health insurance for all or part of the year and (1) whose employer offer of coverage to the employee was more than 8.16% of their tax household income, (2) whose employer offer of coverage to the employee and spouse and/or children was over 8.16% of tax household income, and/or (3) for whom the least expensive Marketplace plan for the year was over 8.16% of the tax household income. If you think any of these situations apply for part or all of the year, you can try for the affordability exemption. Please note that most people will not qualify for the affordability exemption specific to the Marketplace. Marketplace premiums were designed to adjust (in the amount of premium tax credits applied) based on a set of factors in order to provide affordable coverage for individuals. Only in some very specific situations, like if someone is a smoker or is filing MFS, would the least expensive Marketplace plan have been over 8.16% of tax household income and thus qualify the individual for the affordability exemption. To figure the affordability exemption, you will first answer some basic questions in the Healthcare section based on the taxpayer s situation. This next screen deals with total tax household income. which includes dependent income. Read the questions carefully and enter any amounts if applicable. For the first box, enter the total of any DD amounts listed on the W-2s. You only need to enter an amount if there are DD amounts on the W-2 and you are calculating the affordability exemption. The second set of boxes deals with dependent income. Note: you only need to enter dependent income for dependents who had a filing requirement. 1

You will then select No to the first question about exemptions, which will generate a follow-up question that asks if you would like to apply for the affordability exemption. Select Yes.

If you are claiming the affordability exemption specifically for an employer offer of coverage being unaffordable, you do not need to complete this step.

2 You will then select No to the first question about exemptions, which will generate a follow-up question that asks if you would like to apply for the affordability exemption. Select Yes. On this next screen, you will need to get the monthly premium cost for the lowest cost bronze premium and second lowest cost silver premium. If you are claiming the affordability exemption specifically for an employer offer of coverage being unaffordable, you do not need to complete this step. If you would like the software to consider whether the least expensive Marketplace plan was affordable, you will need to complete this step. Click on the link at the bottom to be taken to the Healthcare.gov tax tool page. Note: if you are applying for the affordability exemption due to an employer offer of coverage being unaffordable, please refer the taxpayer to ICT to compile specific annual premium cost information to then enter in the software. Most people will not have their employer premium information available when doing tax prep, and it can take some time and familiarity with the subject to do the calculations. We will talk more about entering employer premium information later in this document. 2

For those wanting to apply for the Marketplace affordability exemption: you will be taken to Healthcare.gov. Click Get Started under the option for claiming the affordability exemption.

3 For those wanting to apply for the Marketplace affordability exemption: you will be taken to Healthcare.gov. Click Get Started under the option for claiming the affordability exemption. For those wanting to apply only for the exemption related to an employer offer of coverage, skip to the next step on page 7 of this instruction document. The Marketplace will ask you a series of basic demographic questions. Click Resume to start. 3

4 You will then select the tax year for the return you are preparing. It will then ask you how many people are in the tax household. After you answer that question, another question will appear on the page asking for the first name of the taxpayer. You will be prompted to enter the DOB of the taxpayer. 4

5 Several other questions will then appear below. The Marketplace will then ask a few questions about coverage offers. Ask the taxpayer the questions and answer them accordingly. (If the person is an adult who did not have an employer offer of coverage and was without coverage all year, you are likely going to leave all boxes unchecked.) On the next screen, you will review that the questions were answered correctly and then click Continue. 5

6 The next screen will give you the premium amounts you will need to enter in the tax return. You will then go back to the TaxSlayer screen and enter the corresponding premium amount for the monthly lowest cost bronze plan (LCBP) premium and monthly second lowest cost silver plan (SLCSP) premium. 6

This next screen is where you will enter specific annualized premium contribution amount respective to which exemption reason you are applying for.

7 This next screen is where you will enter specific annualized premium contribution amount respective to which exemption reason you are applying for. If you are applying for the Marketplace affordability exemption, you will enter the amount in parenthesis after #3 in the box for each month the exemption applies. (Example: If the taxpayer was only without coverage for November and December, you will only enter that amount for November and December.) If you are applying for the affordability exemption for the whole year, you would enter the amount in parenthesis in the spaces for each month of the year. If the taxpayer is applying for the exemption for an unaffordable employer offer of coverage (either to the employee or to the whole family), you would enter the annualized premium contribution amount in the box for each month the taxpayer had that offer of coverage and is applying for the exemption. Make sure you are entering the amount specific to the person listed at the top of the page. As mentioned earlier, if a taxpayer is eligible for the affordability exemption for an unaffordable offer of coverage from an employer, please refer them to ICT. If the taxpayer has met with ICT to do this calculation, they should have a sheet like the one below. We will need to enter the amount on line A in the box for each month the employee had this offer of coverage and was not enrolled in health insurance. (We can look at the % amount to see if the premium cost was over 8.16%, but just keep in mind that this may not be based on the actual total tax household income for the year.) 7

Note: you do not need to multiply these amounts by 12, as it says on the TaxSlayer screen. ICT will have already done that for you.

8 Next (if applicable), you will look at the yearly premium cost for the family. Example: if health insurance was available but unaffordable to the spouse, you would enter the amount in A1 for each applicable month when you are on the screen for the spouse. Note: you do not need to multiply these amounts by 12, as it says on the TaxSlayer screen. ICT will have already done that for you. Example: if the taxpayer was without health insurance for 6 months of the year and had an unaffordable offer of coverage for 3 of those months, you could enter the annualized premium contribution amount for the employer offer for the three months and the annualized premium contribution amount from the Marketplace Affordability Worksheet for the other three months. The next screen will let you know if the taxpayer is eligible for the affordability exemption. 8

Health Insurance: Affordability Worksheet Implementation Phase II

Health Insurance: Affordability Worksheet Implementation Phase II Phase II implements the Affordability Worksheet to assist preparers in determining if a household member qualifies to claim the Coverage