The Affordable Care Act and Individual Taxes

Preface: Compliance with the Affordable Care Act is easier with an understanding of the options. Here what you need know if you’d like an option for compliance beside health insurance.

Credits: Jake Dietz, CPA

The Affordable Care Act and Individual Taxes

It is tax time again. You may be wondering how the Affordable Care Act (ACA) affects your tax return. The ACA generally mandates taxpayers to have what the IRS calls “minimum essential coverage” for health insurance for every month of the year, claim an exemption from health coverage mandate, or pay a Shared Responsibility Payment or tax.

If you and everyone else on your tax return, such as a spouse and children, had minimum essential health coverage for the full year, then you can check the box on Line 61 of the 2016 Form 1040 stating that you had coverage. Do not check the box if you had other coverage, such as through a church, that was not insurance.

If you did not have minimum essential coverage, you may be able to claim an exemption on Form 8965. The IRS lists various exemptions in their instructions to Form 8965. Several of these exemptions will be covered in this article.

The IRS allows an exemption for “members of certain religious sects.” The IRS instructions define these religious sects as a “sect in existence since December 31, 1950, that is recognized by the Social Security Administration as conscientiously opposed to accepting any insurance benefits, including Medicare and social security.” Essentially, this exemption can be granted to church members whose church is approved for members to have Form 4029 Social Security exemptions. The member can still get the ACA exemption, however, even if they do not have a Form 4029 exemption. The taxpayer should probably not apply for this exemption if they hope to apply for Medicare later in life.

To claim the religious sect exemption, the taxpayer must apply to the Marketplace for an Exemption Certificate Number (ECN.) This application for exemption can be found at the website of the Health Insurance Marketplace. You may also be able to get a copy from a deacon or other church leader, and you could always ask your accountant for a copy.

Another exemption listed in the IRS instructions is for American citizens living outside the U.S. for at least 330 days in a timeframe of 12 consecutive months. For example, suppose that you were an American missionary living in Paraguay for 2016, except for a 3-week furlough in the United States. In this scenario, you would qualify for an exemption to the ACA health coverage mandate because you were living outside the U.S. for at least 330 days. This exemption can be claimed on the tax return without filing for an ECN.

Another exemption that can be claimed on your tax return is for members of a qualified health care sharing ministry (HCSM.) Not all ministries that share medical expenses, however, qualify for this exemption. If you belong to a sharing ministry and are unsure if it qualifies, please ask leaders of the ministry if it qualifies before you file your taxes. This exemption can be claimed on the tax return without filing for an ECN.


Generally, the ACA requires you to have a compliant coverage plan, qualify for an exemption, or pay a tax. If you are wondering if you qualify for any of the other exemptions not mentioned in this article, contact your CPA.

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