Reporting Health Care Coverage On Your 1040 Tax Return
How Is Health Insurance Handled on the New 1040 Form?
Thanks to the Patient Protection and Affordable Care Act (PPACA) – also known as the Affordable Care Act (ACA) or “Obamacare” – it was decided that Americans are required to maintain health insurance coverage. This was signed into law by President Obama on March 23, 2010 and has been making waves in the health care and tax industries ever since.
Individuals are expected to report their health insurance coverage to the IRS on their annual income tax returns. If you did not have health insurance during the year, or even part of it, you’ll likely be required to pay a tax for lack of coverage. (Yes, the Supreme Court ruled that the “penalty” is a federal tax.)
The “Individual Shared Responsibility Provision”
The individual shared responsibility provision – also referred to as the “individual mandate” – was part of the PPACA when it was passed in 2010. Basically, it requires everyone to either purchase health insurance or pay a tax. The individual mandate tax is essentially how the PPACA would be funded.
According to this provision, each person must fulfill at least one of the following requirements:
- You must have qualifying health insurance coverage (called “minimum essential coverage”)
- You qualify for a health coverage exemption
- You pay the individual shared responsibility tax for the months you did not have qualified health coverage or an exemption
In other words, everyone is required to maintain health insurance coverage, qualify for an exemption, or make a tax payment for lack of coverage/exemption. For tax years 2017 and 2018, this information must be reported on your personal income tax return (Form 1040).
It is very important to note that the tax portion of this provision was repealed by the Tax Cuts and Jobs Act (TCJA), which was signed into law by President Trump on December 22, 2017. What does this mean? First, you must understand that the individual shared responsibility provision (the requirement to have heath insurance coverage) and the individual shared responsibility payment (the tax for not having adequate insurance overage) are technically two separate things. The individual mandate is actually still in effect, but the tax for not having health insurance was repealed starting with tax year 2019 – and that means our tax return forms will probably change again next year. How fun!
Is the Health Care Coverage Question on the New Tax Return (Form 1040)?
As you probably know, the IRS will be using a new postcard-sized 1040 form starting with tax year 2018 (for returns filed in 2019). A draft version of the new Form 1040 has been released, which shows that there’s a checkbox for health care coverage on the front of the new return:
This means you will need to indicate whether or not you had “minimum essential coverage” for 2018 by checking the box or leaving it blank.
On the back of the new Form 1040, Line 14 says “Other taxes” and refers to “Schedule 4,” which is new. It looks like Schedule 4 will be used to report the amount of your health care “individual responsibility” tax, if you did not meet the minimum requirements. (See below for more information about Schedule 4.)
For more information about the new postcard-sized Form 1040, see Which Tax Form Do I File Now That 1040A & 1040EZ Are No Longer Used?
The New Schedule 4 (Form 1040)
The IRS has released a draft version of Schedule 4 (Form 1040), which is titled “Other Taxes.”
If you cannot check the box for “Full-year health care coverage or exempt” on the front of Form 1040, you will need to report your individual shared responsibility payment amount on Line 61 of Schedule 4.
If you are eligible to claim a part-year exemption for health coverage, you should use Form 8965 (Health Coverage Exemptions).
Taxpayers who had minimum essential coverage during the year will receive a Form 1095-A, 1095-B, or 1095-C from the provider of that coverage, usually by mid-February.