Form 8965 Filing Guide for 2017 ACA Coverage Exemptions

taxpayers may report exemptions granted by the Health Insurance Marketplace or claim qualifying exemptions directly on their tax returns.

Attach Form 8965 to Form 1040 if you or any member of your tax household did not maintain minimum essential coverage for one or more months during 2017 and you intend to claim or report a coverage exemption. This form serves as a supporting schedule to your income tax return and may not be filed on its own.

Filing Requirements and Household Coverage Status

Review whether you, your spouse (if filing jointly), or any dependents lacked health insurance coverage for one or more months during 2017. The 2017 instructions require disclosure of coverage gaps even if you qualify for an exemption.

You must file Form 8965 if you are filing Form 1040, 1040A, or 1040EZ; you cannot be claimed as a dependent by another taxpayer; and you or someone in your tax household lacked coverage for at least one month during 2017. Your tax household generally includes you, your spouse if filing a joint return, and any individual you claim as a dependent on your income tax return.

Calculate your household income by adding your modified adjusted gross income to the modified adjusted gross income of each dependent you claim who must file a return because their income meets the filing threshold. Gather health insurance statements, exemption notices, and coverage documentation for each household member before completing the form.

Reporting Coverage Gaps and Exemptions

Part II of Form 8965 consists of line 7 only, where you check a box if your household income or gross income falls below your filing threshold. If you qualify for this coverage exemption, everyone in your tax household is exempt for the entire year.

Part III contains lines 8 through 13 for reporting individual coverage exemptions with month-by-month columns from January through December. Enter each month of 2017 when minimum essential coverage was not in effect for you, your spouse, or each dependent in Part

III. The 2017 form requires individual identification of coverage status through separate columns

for each of the twelve calendar months. Do not combine months or estimate coverage periods when completing the form.

Short Coverage Gap Exemption

Coverage gaps of less than three consecutive months qualify for a short gap exemption, meaning only gaps of one or two straight months qualify. Gaps of three months or longer do not qualify for the brief gap exemption and may result in a shared responsibility payment.

The short gap exemption has been available since the individual mandate began in 2014.

Document the dates of any coverage interruption to support your exemption claim when filing your tax return. If you had minimum essential coverage for all twelve months of 2017, check the full year coverage box on the appropriate line of Part III. Complete a separate line for yourself, your spouse if filing jointly, and each dependent claimed on your 2017 return.

Marketplace-Granted Exemptions

If you received a 2017 Health Insurance Marketplace exemption certificate, enter the exemption code in Part I of Form 8965. Exemption certificates issued in 2016 or early 2017 that cover the calendar year 2017 must be reported with the corresponding exemption code provided by the

Marketplace.

The 2017 form structure separates exemption reporting in Part I from coverage reporting in Part

III. Some coverage exemptions can only be granted by the Health Insurance Marketplace, including exemptions for members of certain religious sects and general hardship exemptions.

Apply to the Marketplace for these exemptions before filing your income tax return. If the

Marketplace has not processed your application by the time you file, enter pending in the exemption certificate number column for each individual listed.

Calculating the Shared Responsibility Payment

For tax year 2017, the instructions use a flat per-person penalty of $695 for adults and $347.50 for children under age 18, or 2.5% of household income, whichever amount is greater. Multiply the applicable figure by the number of months without coverage to arrive at the total shared responsibility payment.

Only months without minimum essential coverage and without an applicable exemption are included in the calculation. If Part III shows uninsured months for any household member, complete the calculation worksheet provided in the 2017 instructions. Each household member’s liability is calculated separately. Report the final shared responsibility payment on the designated line of Form 8965.

Reporting Payment on Form 1040

Transfer the shared responsibility payment amount from Form 8965 to Form 1040, line 61. All filing statuses use the same line number to report the shared responsibility payment.

The 2017 instructions clarify that the shared responsibility payment is not a tax credit and cannot reduce your tax liability below zero. Include the payment amount in your total tax obligation for 2017 when calculating your balance due or refund.

Attach Form 8965 to your 2017 Form 1040 in the sequence required by the 2017 return assembly instructions. Include any exemption certificates or correspondence from the Health

Insurance Marketplace with your filing.

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