Form 8965 Health Coverage Exemptions for 2017 Tax Year Guide

responsibility payment when they qualify under specific categories. The Internal Revenue

Service provides detailed instructions for reporting coverage exemptions, including religious conscience objections, health care sharing ministry membership, Indian tribe enrollment, incarceration, and qualifying hardships.

Each exemption category has distinct documentation and certification rules that apply only to the 2017 tax year, and eligibility does not automatically carry over from 2016. Taxpayers must understand which exemption applies to their situation and complete the appropriate sections of

Form 8965 accurately.

Understanding Form 8965 Structure and Reporting

Requirements

Form 8965 attaches to your federal tax return and contains three distinct parts for reporting different types of health coverage exemptions. Part I reports Marketplace-granted coverage exemptions for individuals who received an Exemption Certificate Number from the Health

Insurance Marketplace. In contrast, Part II contains only line 7, which you check if your household income or gross income falls below your filing threshold.

Part III provides a month-by-month grid for reporting individual exemptions using codes A through H, with separate columns for each calendar month from January through December.

Marketplace-granted exemptions require an ECN in Part I, while return-based exemptions use

Part III with specific exemption codes.

Marketplace-Granted Exemptions and Hardship

Documentation

Hardship exemptions require Marketplace approval before you file your tax return. The

Marketplace reviews your application and issues an Exemption Certificate Number that specifies which months the exemption covers, which you then report in Part I of Form 8965 without entering month-by-month details on the form itself.

Documentation proving your hardship must include specific dates, such as eviction notices, utility shutoff notices, medical debt collection letters, or bankruptcy filing dates. The 2017 instructions expanded hardship categories to include utility shutoffs, property foreclosures, and evictions not previously recognized.

Religious Sect and Health Care Sharing Ministry

Exemptions

Members of certain religious sects must obtain Marketplace approval and report an Exemption

Certificate Number in Part I of Form 8965. The religious sect must have existed since December

31, 1950, and the Social Security Administration must recognize it as conscientiously opposed to accepting insurance benefits, including Medicare and Social Security.

Health care sharing ministry members claim their exemption differently by completing Part III with Code D and checking the appropriate month boxes. Members must verify that they maintained continuous membership for each entire month claimed, and both exemption types apply only to complete months under the 2017 rules.

Indian Tribe Enrollment and Monthly Eligibility

Indian tribe members claim exemption code E in Part III for months during which enrollment was active. The 2017 instructions specify that an individual qualifies for any month in which they were a member of a federally recognized Indian tribe for at least one day during that month, including Alaska Native Claims Settlement Act Corporation shareholders from regional or village corporations.

Calculating the Shared Responsibility Payment

For the 2017 tax year, the shared responsibility payment is determined by whichever calculation yields the higher amount. One option charges a flat rate of $695 per adult and $347.50 per child under age 18, capped at $2,085 per household. The alternative method applies a percentage-based calculation equal to 2.5% of household income that exceeds the filing threshold.

Because the penalty is assessed every month, Form 8965 requires uninsured months to be tracked separately for each family member. A lapse in minimum essential coverage lasting even

a single month, without a qualifying exemption, can result in a payment obligation for that month alone.

Household Income and Filing Threshold Exemptions

You may claim exemption on line 7 of Part II if your household income or gross income falls below your filing threshold for 2017. Modified adjusted gross income for Form 8965 purposes includes your adjusted gross income plus certain additional items from your tax return, and you must calculate household income by adding the modified adjusted gross income of each dependent required to file their return.

Taxpayers who qualify for this exemption receive coverage for their entire household for the whole year. You do not need to complete Part III when you check the box on line 7 because everyone in your tax household becomes exempt.

Filing Requirements and Documentation Standards

Attach completed Form 8965 to your 2017 Form 1040, Form 1040A, or Form 1040EZ. Include your Social Security number and the Social Security numbers of all family members listed on the form, and remember that Form 8965 does not contain a separate signature line because your signature on the primary tax return certifies all attached forms under penalties of perjury.

Standard IRS record retention guidelines require keeping tax records for at least 3 years from the filing date or 2 years from the date you paid the tax, whichever is later. Keep records for six years if you underreport gross income by more than 25%, and retain original, dated notices and correspondence that support your exemption claims.

Key Changes and Technical Details for 2017

Part II remained a simple checkbox section on line 7 for claiming exemption based on household income or gross income below the filing threshold. Part III contains the month-by-month reporting grid for individual exemptions with codes A through H, and exemption codes changed in 2017 to reflect new hardship categories added by IRS guidance during that year.

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