We've been long-time users of TurboTax, and this year is no different. What I love most about the software is that it demystifies the entire reporting process and walks you through all the deductions, healthcare and taxes. This year is a particularly important one as the Affordable Care Act is going into effect, with a new requirement to report health care to the IRS.
All the terminology around this topic can seem a little unwieldy, but healthcare and taxes are actually quite straightforward if you understand the three main categories that every American falls into.
What Category do I Fall Into in Terms of Healthcare and Taxes?
Every taxpayer falls into one of three categories when it comes to healthcare and taxes, and their actions will be dictated by their situation. There are those insured through an employer, those insured through health care exchanges, and those who are uninsured.
9 out of 10 taxpayers are already compliant with healthcare and taxes because they have insurance through an employer, Medicaid, Medicare, or a private provider. If that's you, you're in luck! All you have to do is check a box on your tax return to confirm that you have health insurance. That's it.
Insured through Exchanges
If you don't have private or employer health insurance, you will most likely want to enroll in insurance through healthcare.gov or your state exchange from now through February 15, 2015. This is important to know, as taxes aren't due until later but you must to meet that deadline in order to be compliant with regulations for healthcare and taxes. After you purchase insurance through the exchange (or “the Marketplace,” as some people refer to it), you'll receive a 1095-A form that can easily be entered into TurboTax software to confirm compliance. Depending on your income level, you may qualify for government assistance to help pay for insurance. TurboTax's health care calculator can help you determine eligibility.
People who don't have insurance may pay a penalty of $95 or about 1% of their income. You can use TurboTax's free calculator to estimate how much your penalty may be for 2014, based on your family size and income. Half of people who are uninsured can qualify for an exemption due to not meeting the income requirement or other reasons.
That is everything you need to know about healthcare and taxes. Pretty straightforward, as long as you meet the deadlines and accurately report your category. I, for one, am getting this stuff taken care of ASAP so come tax season I can just relax.