Form 8965: Health Coverage Exemptions

Note: The individual mandate from the Affordable Care Act is no longer required. The following information about Form 8965 does not apply to federal tax returns after 2019. This is subject to change, and we will keep you updated should the form become available again. 

Moreover, many states have their own health care penalties and mandates. Please refer to the tax policies in your filing state for further guidance and exemptions. 

If you don’t have health insurance, you might get a little uneasy around tax season. Since the signing of the Affordable Care Act, all taxpayers are required to either have health insurance or pay a penalty—which puts people who can’t afford health care and those who missed open enrollment in a tough bind. If you’re in this camp, don’t panic quite yet. There are exceptions to the rule, and you may be able to claim a coverage exemption using IRS Form 8965. Keep reading to learn about how you just might be able to avoid paying a penalty on your tax return, or use the links below to skip to the section that interests you the most.

What is Form 8965?

As mentioned earlier, the Affordable Care Act made having health insurance a requirement for every person in the United States. However, it’s not always possible to have health coverage 100% of the year. Luckily, that’s where IRS Form 8965, Health Coverage Exemptions, comes in.

The tax form was created by the IRS for taxpayers who wish to either claim or report a coverage exemption. Exemptions include living abroad, not being able to afford coverage, and more—we’ll discuss exemptions in detail later on. The form provides instructions to help you calculate the shared responsibility payment for any month you (or another member of your tax household) didn’t have health care coverage nor an exemption. For the purpose of Form 8965, a “tax household” generally includes you, your spouse (if filing a joint return), and any individual you can claim as a dependent.

Note that if your exemption has already been approved and granted by a Health Insurance Marketplace, then you don’t need to file this form.

Understanding Health Coverage Exemptions

A Form 8965 exemption means that you’re excused from the individual mandate—the part of the law that requires you to have health insurance. As a result, you won’t be required to pay fees for any month you or your household are uninsured.

In most cases, you can claim a coverage exemption by submitting IRS Form 8965 alongside your federal tax return. However, in a few circumstances you need to fill out an application, print it, and mail it to the Health Insurance Marketplace for review. If your exemption is approved, you’ll report it on your tax return by following the instructions found on IRS Form 8965. We’ll look at both instances in-depth below.

Who Qualifies for Health Care Exemption Form 8965?

As previously mentioned, these health coverage exemptions must either be claimed on the tax form itself or through the Marketplace. This is because several exemptions can’t be claimed on Form 8965. Read through the following types of exemptions to see if any of these circumstances apply to your financial situation. If so, consider taking the time to follow the Form 8965 instructions or seek professional tax help to get assistance and avoid paying a penalty fee.

Form 8965 Exemptions

The following are exemptions that can be claimed on Form 8965:

  • Income-related exemptions: You can claim an exemption if your income is below the tax filing threshold. Also, if the lowest-priced coverage available to you, either through the Marketplace or job-based plan, would cost more than 8.16% of your household income, you can claim an affordability exemption.
  • Health coverage-related exemptions: If you were only uninsured for one to two months, you may qualify for a short gap exemption. You may also be exempt if you live in a state without an expanded Medicaid program, and your household income is below 138% of the federal poverty level.
  • Group membership exemptions: You can claim a Form 8965 exemption for membership in certain groups, including a federally recognized tribe (if you were eligible for services through an Indian Health Service Provider) or recognized health care sharing ministry.

Other exemptions which would require you to file tax Form 8965 include being incarcerated, as well as being a U.S. citizen who is living abroad or not legally present.

Health Insurance Marketplace Exemptions

Below you’ll find exemptions that you must apply for through the Marketplace:

  • If you’re a member of a qualified religious sect with religious objections to insurance, including Social Security and Medicare
  • You were not provided with affordable coverage based on your projected household income
  • Your current policy was nonrenewable and current offerings from your health insurance provider were too costly
  • You had short-term coverage via AmeriCorps State and National, VISTA, or the NCCC

Lastly, hardship exemptions must also be applied for through the Marketplace. These exemptions differ from others because they’re temporary, and typically exempt you from the individual mandate for less than a year. The exemptions are usually only granted during the time you’re experiencing hardship. For example, if there was a death in the family, the exemption would only apply to the month of the death and the month before. Other hardship scenarios include:

  • You were homeless
  • You faced eviction or foreclosure
  • You filed for bankruptcy
  • You had a medical expense that you couldn’t pay and resulted in liability
  • You received a shut-off notice from a utility company
  • You experienced domestic violence
  • You experience substantial property damage caused by a fire, flood, or other natural or human-related disasters
  • You incurred an unexpected increase in expenses due to caring for an ill, disabled, or aging family member

This list of Form 8965 exemptions is more ambiguous than other examples, and the government addresses each application on a case-by-case basis. For a faster response, mail in your application before the open enrollment period begins. If you qualify, you’ll be mailed an exemption certificate number which you’ll report on your Health Care Exemption Form 8965. If your application is denied, you have the opportunity to appeal that decision.

How Do I File Form 8965?

If you need to claim or report a health coverage exemption, be sure to carefully follow Form 8965 instructions line by line, making sure not to gloss over any critical information.

  • Part I: If you or another member of your tax household was granted a coverage exemption from the Marketplace, complete this section.
  • Parts II and III: If you or another member of your tax household is claiming a coverage exemption on your tax return, fill out this section.  The amount of required information may vary depending on your situation.

In the event you couldn’t find access to affordable coverage and didn’t receive a health care exemption, you may have to pay a penalty. You’ll use one of the following tax forms to calculate the cost of your shared responsibility payment and then report it on your tax return—either Form 1040, line 61 or Form 1040EZ, line 11.

However, if you’re not required to file a tax return, your tax household is exempt from the shared responsibility payment and you don’t need to file Form 8965.

How to File Form 8965 Electronically

To file Form 8965 electronically, use a tax preparation program or work with an authorized e-file provider. The IRS has several electronic resources you can take advantage of to submit your tax return and other important documents online.

Where to Mail Form 8965

Where you’ll mail your paper tax return depends on the state that you live in or are filing for. You can visit the IRS’ Where to File site to locate the specific mailing address you need.

However, it’s recommended that you e-file whenever possible, as staffing issues could delay processing times.

Form 8965 Filing Deadlines

Submit Form 8965 before or by April 15 of the current tax year. Only one form needs to be filed per household.

Get Professional Help

To ensure your greatest shot at claiming a coverage exemption, trust the dedicated team of Community Tax practitioners to advocate on your behalf. We offer full tax filing services and are happy to prepare your IRS Form 8965 to relieve you from stress and worry. We’ll work closely with your unique situation to find the best possible tax resolution, and we’ll pore over every detail to see if we can help you save on other qualifying credits, deductions, and write-offs. Get in touch to see how we can help solve any of your tax-related needs.

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