Healthcare and Taxes: Important Terms You Should Know

By Jackson Hewitt: 

The Affordable Care Act (ACA) changes the rules for health insurance.  Everyone can now buy coverage.  However, the law has a tax penalty for people who do not have health insurance. Coverage may also get cheaper.  Many people will qualify for new tax credits.  These credits will help pay for their health insurance.  Others may qualify for free coverage.

To receive these benefits, though, you generally have to file your taxes.  That is why we at Jackson Hewitt say that April 15^th is now the most important day in health care!

What’s Different About Health Insurance in 2014?

Insurers must now offer to cover you, even if you have been sick in the past.  The ACA also forces insurers to pay for your current health conditions; they can no longer exclude these.  So even if you are or have been sick, you can still get coverage.  You will also get “first-day” coverage of all services. Insurers can charge premiums based on your age, where you live and if you smoke.  But they can no longer charge different rates for males and females.  They also cannot charge more if you have health conditions.

The Tax Penalty for Not Getting Coverage:

Under the ACA, most people will pay a tax penalty if they do not have health coverage.  The penalties are about 1% of your income in 2014.  The penalties will go up each year.  But, you can sign up for coverage to avoid the penalty.

Making Coverage More Affordable:

The ACA makes health coverage cheaper in a few ways:

• Medicaid Expansion: Many states have expanded Medicaid.  Up to now, Medicaid covered only people on the “five finger” test (i.e., or the aged, blind, disabled, children, pregnant/parenting adults). Now, many states will cover you if you are not on the five-finger test (for example, if you are an adult under 65 without children).  And these states will essentially use the same income limit for everyone, regardless of which “finger” you are on.  However, this varies by state.

• Tax Credits: The federal government will provide tax credits to people who do not have affordable coverage through their jobs etc.  To qualify, an individual’s income must be between the limits for their household size.  The amount of your credit will depend on your estimated income and household size.  The government will pay these credits directly to the insurance plan that the person picks; the person enrolled will just pay his or her share of the premium to the company.  At tax time, the individual will settle up with the government to make sure that no one paid too little or too much.  However, you must buy coverage on the new marketplaces to get these credits.  Our partners at Get insured can help with this!

• Cost-Sharing Reductions: The federal government will also lower deductibles for some families.  Some people may see their deductibles go down by as much as 80%.  You automatically apply for this when you apply for the tax credits.

Have questions? We can help you! Call today for an appointment.

Editor’s notes: Jackson Hewitt Tax Service Inc. is an industry-leading provider of full service individual federal and state income tax preparation, with 6,800 locations throughout the United States. We have operated in the Sacramento valley since 1987 and as a franchise system are well established as your neighborhood tax preparer.

We can help you navigate complex tax issues, including how healthcare will affect your taxes!