How Does Health Insurance Affect Your Taxes?

Small Business

How Does Health Insurance Affect Your Taxes?

Updated on December 02, 2019


Same as every year, tax season has arrived—which means that you will need to spend some time gathering together all of your financial and health insurance documents. Whether you qualified for a premium tax credit, or might owe additional funds, your insurance does impact your tax return. Some of the main tax forms to look out for are 1095-A, 1095-B, and 1095-C , and we’ll explain how to know which one you should receive.

Learn how to report your health insurance for 2018 taxes. 

The Affordable Care Act (ACA) requires that all United States citizens, legal residents, and dependents have health insurance throughout the entire year. Fortunately, your health plan can be supplied via employers or purchased through a government sponsored or private health care marketplace. With this in mind, if you weren’t enrolled in a health plan for any portion of 2018, then you might have to pay a tax fee. As a general rule of thumb, if you didn’t have insurance for any or all of 2018, then you might have to pay $695 or 2.5 percent of your income as a tax penalty. The good news is that if you are a single with an income that ranges between $11,880 to $47,520 for the entire year, then you might receive a tax credit that can be applied to your insurance premium. No matter your income level, one thing is certain, you will have to report your health insurance on your 2018 taxes.

What forms should you use on your 2018 taxes?

There are different forms that you will use to report your health insurance on your 2018 taxes. It is important to note that these forms will vary on a) the type of health plan that you purchased, b) how you received your health insurance (i.e. from a marketplace or an employer), and c) if you had a marketplace plan and used premium tax credits to lower your insurance costs throughout the year.

  • Form 1095-A, Health Insurance Marketplace Statement. — This form is used if you have purchased health insurance from a government-sponsored or private marketplace. The form will include the information that you need to complete Form 8962, which is used to receive a premium tax credit. Additionally, you will need to complete Form 1095-A for each insurance policy that you had for 2018.
  • Form 1095-B, Health Coverage. — Your insurance provider will typically send you this form to show that you and your family had health coverage throughout all or part of 2018. With this in mind, this form is not typically included in your tax return; however, it does contain vital information that will help you to properly fill out your taxes.
  • Form 1095-C, Employer-Provided Health Insurance. — If you received health insurance for all or part of the year from an employer, then they will send you Form 1095-C. Like Form 1095-B, this form has vital information that you will need to properly file taxes, however it will not be included in your actual tax return.

If you have additional questions about which health insurance forms to look out for during tax season, visit the official IRS website.

What does it mean to “reconcile” your premium tax credit? 

If you purchased a health plan from either a private or government-sponsored marketplace, and used premium tax credits, then you will need to “reconcile” your premium tax credit. To do this you will need to complete the following steps.

  1. Write down the amount you used to lower your monthly premium costs throughout the year.
  2. Based on your final income for the year, calculate the actual amount of financial aid that you qualified for in 2018.
  3. Compare the figure from Step 1 with the figure from Step 2. If there is a difference in the figures from Step 1 and Step 2, then you will need to either pay additional funds, or receive a tax refund.

The good news is that Form 1095-A will help you to easily complete Steps 1-3, so that you can accurately determine if you owe additional funds, or if you will receive a tax refund. Keep in mind, that if you didn’t take any of your premium tax credit throughout 2018, then you will need to fill out to complete Form 8962, so that you can receive your tax refund.

Make filing taxes easier by keeping good records. 

Filing taxes is made easier when you keep good records. Remember that your health care provider will send you the information needed to successfully complete your Form 1095-A. Additionally, you will need to reconcile your premium tax credit and properly fill out Form 8962 so that you can receive your tax refund (if applicable). In conclusion, by keeping good records, you can more easily understand how your specific health plan will impact your taxes at the end of the year.

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