Premium credit is available for health insurance purchased on Federal Exchange
A government payment/premium credit is available for qualifying individuals who purchase health insurance on an exchange. The credit is payable in advance if the taxpayer chooses. The credit is based off of projected Income. The taxpayer must make computation when he/she files their return to see if they received too much or too little of the credit.
A controversy has erupted concerning the premium credit. The statute makes the credit available for insurance purchased on an exchange established by a state. A federal exchange was established for many states that did not establish their own exchanges. The IRS has issued regulations making the premium credit available for insurance purchased on a federal exchange, but two Circuit Courts reached opposite results on the validity of these regulations. One upheld them, while the other said they were invalid. However, the latter decision was put on hold because, subsequently, that circuit agreed to have the issue considered by all of the judges in the circuit. Depending on what happens in that and other cases, the issue might ultimately have to be resolved by the Supreme Court.
Regulations and guidance on the premium credit
The regulations allowing the credit for insurance purchased on a federal exchange were issued in 2012.They also covered other basic matters pertaining to the credit but did not address a number of issues that could come up in specialized situations. Recently, the IRS issued additional regulations on the credit. Among other things, these regulations address the specialized situations that were left out of the 2012 regulations. For example, they explain how to reconcile advance payments with credit amounts in the case of divorced taxpayers and married taxpayers who file separately. They also provide rules for the interaction between the credit and the deduction for the health insurance costs of a self-employed individual. At the same time, the IRS, in separate guidance, provided two optional computation methods that a taxpayer can use to avoid the circular computations that would otherwise apply if he qualified for both the deduction for health insurance costs for self-employed individuals and the premium tax credit.
Exemptions from penalty for not having health coverage
The IRS has released Publication 5172, Facts about Health Coverage Exemptions. It is a one-page outline of the exemptions from the individual shared responsibility provisions of the Affordable Care Act (ACA), also referred to as the individual mandate. Under the ACA provision, beginning in 2014, individuals and their family members must have qualified health insurance (i.e., minimum essential coverage), make a shared responsibility payment when filing their federal income tax return, or qualify for an exemption. A taxpayer obtains an exemption from either the Health Insurance Marketplace or the IRS, depending on the type.All exemptions are reported on the tax return, although a taxpayer is automatically exempt if he doesn't have to file a return because his income is below the filing threshold for his status. A brief description of the available exemptions and where a particular exemption may be obtained (IRS, Marketplace or Either) follows:
…Members of certain religious sects (Marketplace)
…Short coverage gap (IRS)
…Certain noncitizens (IRS)
…Coverage is considered unaffordable (IRS)
…Household income below the return filing threshold (IRS)
…Members of federally-recognized Indian tribes (Either)
…Members of health care sharing ministries (Either)
…Hardships (Either depending on which hardship exemption is claimed)