If this is your first time here, Molly’s Money is a regular series I write on this blog that includes ALL things personal finance – debt management, budgeting, home buying, savings, investment, etc. I am NOT a financial advisor, but I am married to one! These are just things that I have learned over the years as I struggled with my own personal finances and ultimately, became debt free in 2012. Got a question about money that you want answered? Leave it in the comments below or email me!
I will state off the bat that this post is for my American readers… if you are an international reader… thank you SO MUCH for reading… but I know this post is probably not going to be all that applicable or helpful for you. 🙂
For my American readers… this post is for you… and please, don’t let the words “health care” or “taxes” scare you from reading! My goal is to show y’all how you can approach the new changes and my goal is for y’all to be prepared for next year! That’s the whole goal of my money series to begin with… to help y’all with all things personal finance… and taxes, as much as we aren’t really fans of them, definitely fall under the realm of personal finance. Right? Right.
I’m going to try to do this as simply as possible and really break it down for you!
For the first time ever, health care and taxes have come together. I’m sure you know by now about the ACA (Affordable Care Act – aka: “Obamacare”) is the new health care reform that is designed to ensure that everyone has health insurance… but it also imposes tax penalties on those that do not. Since 2014 is the first year that you are required to have health care, 2015 is the first year in which you’ll be reporting that care on your tax filing.
Now, for most Americans, the ACA will hardly (if at all) affect their taxes and really all it will be will be a simple “box check” in the tax filing process.
Taxpayers are going to fall into THREE categories when it comes to ACA and taxes: those who are insured through an employer, those who are insured through health care exchanges, and those who are uninsured.
Let’s break that down a little further…
- For most people (approximately 9 out of 10 taxpayers), making sure they’re in compliance with ACA on taxes is pretty much going to be a non-issue because they have insurance through their employer, Medicaid, Medicare, or a provide provider. These people will simply need to check a box on their tax return to confirm that they have health insurance. They don’t have to do anything else for tax preparation (in that area).
Insured Through Exchanges:
- About 8 million people became insured through healthcare.gov this year OR their state exchange
- The people who purchased insurance through the exchanges will receive a 1095-A form from healthcare.gov or their state exchange.
- Those people will need to enter their information from their 1095-A form on their taxes… just like you do with a W-2 form when you have a job
- About 42 million people are currently uninsured in the US right now
- Those who DO NOT have health insurance and do not qualify for exemptions will pay a penalty of about $95 or about 1% of their income
- Now, if you currently DO NOT have insurance, I’d think about buying insurance this year during the open enrollment period. Open Enrollment for the health cafe exchanges starts on November 15, 2014 and ends February 15, 2015
- TurboTax has a free calculator that you can use to estimate how much your penalty might be if you don’t have insurance for 2014. Since the penalty is based upon your family size and income… I suggest using the calculator to find out…
- About half of the people that are uninsured (23 million) COULD possibly qualify for an exemption, but most of those people are unaware and will probably end up paying a bunch of unnecessary penalties
- Only 5% of people that qualify for an exemption have actually applied *source: TurboTax
- There are a bunch of reasons why someone may be exempt from the penalty for not having health insurance… such as not meeting the minimum income requirement. TurboTax Health has a ton of free tools to help you figure out if you might qualify for an exemption.
Other Health Care Info of Note:
- As I mentioned earlier, if you want to enroll and get insurance through the Marketplace in 2015, you have to do it during the open enrollment period which is November 15th, 2014 through February 15th, 2015.
- Now, if you can’t afford health care through your employer or even out of pocket, you CAN enroll for insurance through the Marketplace and you might even be able to qualify for government assistance through premium tax credits and subsidies.
- Your eligibility is usually determined by your household income and your family size. You can see if you’re eligible for a subsidy by checking out TurboTax’s health care calculator at TurboTax health.
More than TWO-THIRDS of Americans live paycheck to paycheck… so, it’s really, SO important for so many people that their money doesn’t go to penalties and compliance mumbo jumbo… it should go to actual care.
The average tax refund last year was around $2,800 (Source: IRS). That’s A LOT of money to a lot of people… But, the truth is, that so many people who need that money the most are the people who end up paying the most to get their taxes done because they just have no idea about all the resources that are available to them.
I remember the first year I filed my own taxes, I used TurboTax to help me through the process and I’ve used it every year since then. I love that it gives you the tools to understand the step-by-step process of filing taxes… but I also love that they’ve created TurboTax health that will give you even MORE resources to understand health care and your taxes.
It’s one of those things that yes, can seem a bit overwhelming on the surface, but once you really dig in by using a service like TurboTax, it’s actually a WHOLE lot easier than you realize! Y’all know that I’m a huge advocate of educating yourself on your finances and being prepared… and by doing that earlier, you’re just setting yourself up for success!
What about you? What questions do you have? Have you used TurboTax to do your taxes before? At what age did you start doing your own taxes?
I was selected for this opportunity as a member of Clever Girls and the content and opinions expressed here are all my own.