Hardship Exemptions for the Affordable Care Act
If your gross income drops significantly because of financial or personal hardships and you don’t have health insurance or Medicaid, there are some exemptions that might apply to you. Financial or personal hardships can range from an inability to pay for the insurance to unexpected, natural, or man-made circumstances.
Claiming a hardship exemption means that paying for health insurance will deprive you of food, housing, clothing, or other personal or household necessities. You can claim some of the exemptions on your return, but some must be claimed on your health insurance marketplace (see Healthcare.gov to find yours).
Tax Law Update: The individual mandate and penalty have been repealed beginning with tax year 2019, and exemptions will no longer be an issue. But for 2018 returns, the mandate and penalty are still in effect, as are exemptions.
Exemptions for Financial Hardships
If you’re unable to pay for health insurance because your gross income decreased, you may claim a financial hardship exemption, meaning you wouldn’t have to pay a penalty for not being covered. If one of the following circumstances apply to you, you may be exempt:
- The healthcare coverage exceeds 8.05% of 2018 household income. The percentage is calculated by dividing the monthly cost for insurance by the household’s net income.
- Your gross income is below the filing threshold for your filing status.
- Your current health insurance will not be renewed and the alternatives available are currently too expensive for you and your family.
As part of the financial hardship exemption, if the state you currently live in did not expand Medicaid coverage, you may claim an exemption if purchasing insurance would be a hardship.
Exemptions for Personal Hardships
Unexpected things happen during the year that can drastically affect you and your family’s income. If you experienced a personal hardship during the year, you can claim an exemption and not have to pay the penalty for being uninsured. If you experienced one of the following hardships, you may qualify for an exemption:
- You recently became homeless.
- You were evicted in the past six months or are currently facing eviction or foreclosure on your home.
- A close family member has recently died.
- You were a victim of domestic violence.
- Your home was damaged due to a recent fire, flood, or other natural or man-made disaster.