How do health care reform and taxes connect? The Affordable Care Act is single largest change to the tax code in two decades. Find help navigating the complexities of the new health care legislation, Medicare, Medicaid and other medical deductions.
09-27-2017 01:03 PM
I am starting a new job and my current health insurance will end Oct 31st 2017. I am not eligible for my new company's insurance program until Feb 1st 2018. Since I will only be missing qualified insurance for 2 months(Nov, Dec) in the 2017 calendar year, will I have to pay the ACA penalty? Or does that carry over into January of 2018 as well?
Solved! Go to Solution.
09-27-2017 11:47 PM
Welcome to the H&R Block community.
The ACA is one of my areas of expertise and I'll be glad to assist you with this one.
Technically you will have a gap of four months, however there is some good news. Under the ACA rules you can take the short-term coverage gap exemption for November & December of 2017 if you did not have any other coverage gaps. You will not be able to take a short-term coverage gap exemption for January & February of 2018 though. The reason why is because the way the exemption works when a gap is split between two taxable years is that the months from the second year do not count when applying the exemption to the first year because the second year isn't on the books yet so to speak. The months from the first year do apply when looking at the exemption for the second taxable year though. So when applying a short-term coverage gap exemption for 2017 you only have November & December of 2017 to look at because your tax year ended on December 31st (2018 hasn't occurred yet for purposes of completing your tax return). When you complete your 2018 tax return though you will have November 2017, December 2017, January 2017, and February 2017 to take into account because 2017 will have occurred and you will already have filed a return for that year. The gap will not qualify as short-term when looking at it for your 2018 return.
For 2018 we'll have to look at the income-based exemptions and perhaps other possibilities, and there's a good chance that you'll qualify for at least one of them unless your income is really high. Coming across someone who can't qualify for any exemptions at all is actually fairly rare in my experience.
If you have any other questions I'll be glad to help.
Senior Tax Advisor (Tampa, FL)
09-29-2017 10:03 AM
Thank you Louis. That was basically the exact answer I was looking for. So for my 2017 taxes, I should be exempt. But for 2018, I will have a 4 month gap that I will have to pay the penalty. I do not make a lot of money, but I think that I make enough to fall out of any other exemptions..
09-29-2017 05:46 PM
You're quite welcome.
Correct. You'll be exempt for 2017 and you'll pay a penalty for 2018. However, the penalty for 2018 will only be for two months. For purposes of determining if you qualify for the exemption you have a 4 month gap, but for purposes of calculating the penalty you only have a two month gap because the penalty is only charged for months in the year for which your tax return is being done. In other words you're exempt from November & December but you'll pay a penalty for January & February only, you just won't pay the penalty until you do your 2018 return.
We'll look at the other exemptions later on for 2018. You would be surprised what you might qualify for.