Do You Have to Show Proof of Health Insurance When Filing Taxes?

Health insurance and taxes have been closely linked since the introduction of the Affordable Care Act (ACA). While the federal mandate requiring individuals to have health insurance has been lifted, understanding the relationship between health insurance and taxes remains crucial for many.

Key Takeaways

State-Specific Mandates: While the federal mandate requiring health insurance was eliminated in 2019, some states have implemented their own health insurance requirements. Residents in these states might face penalties on their state taxes if they don’t have coverage or an exemption.
Importance of 1095 Forms: Even without a federal penalty, individuals may still receive tax forms like 1095-A, 1095-B, or 1095-C detailing their health coverage. These forms are crucial for reconciling premium tax credits and for record-keeping purposes.
Tax Implications: Those who received premium tax credits to assist with insurance costs must reconcile these on their tax return. Discrepancies between the advance credits received and the actual eligible amount can result in owing additional tax or receiving a refund.

The Current State of Health Insurance and Taxes

Starting from the tax year 2019, the federal mandate requiring individuals to have health insurance or face a penalty was eliminated. However, some states have implemented their own individual health insurance mandates. If you reside in one of these states and don’t have coverage or an exemption, you might be charged a fee when you file your state taxes. It’s essential to check with your state’s regulations or consult with a tax professional to understand your obligations.

Understanding the 1095 Forms

Even if there’s no federal penalty for not having health insurance, individuals might still receive tax forms detailing their health coverage. These forms are essential for various purposes, such as reconciling premium tax credits or claiming other health-related deductions on your tax return.

Form 1095-A: Health Insurance Marketplace Statement

Individuals who purchased insurance through the Health Insurance Marketplace receive Form 1095-A. This form provides essential details about the policy, such as the effective date of coverage, the amount of premiums paid, dependents covered under the policy, and any advance payments from premium tax credits. If you’re claiming or reconciling premium tax credits, the information on this form is crucial.

Form 1095-B: Health Coverage

Form 1095-B is for those who have health coverage outside of the marketplace or through government programs like Medicare or CHIP. It serves as proof of insurance and provides details about the type of coverage and the period covered.

Form 1095-C: Employer-Provided Health Insurance Offer and Coverage

Large employers, typically those with 50 or more employees, issue Form 1095-C to their employees. This form confirms whether an employee participated in the company’s health plan and provides details about the policy and the individuals covered under it.

Implications for Tax Returns

For those who received premium tax credits to assist with insurance costs, it’s essential to reconcile these on the tax return using information from Form 1095-A. If there’s a discrepancy between the advance credits received and the actual eligible amount, individuals might owe additional tax or receive a refund. Additionally, while Forms 1095-B and 1095-C are not required for filing taxes, they are crucial documents to keep for records.

Conclusion

The landscape of health insurance and taxes has seen significant changes in recent years. While the federal mandate has been lifted, the importance of understanding your state’s requirements and the role of health insurance forms in tax filings remains. Always consult with a tax professional or use trusted tax software to ensure you’re meeting all obligations and maximizing your deductions.