What the Affordable Health Care Act Means to Me
by Rick Gray
Are you an overseas US taxpayer confused by new requirements of the Affordable Health Care Act? You’re not alone. Everyone overseas has new requirements when filing 2014 tax returns. Here are the basic rules.
For educators overseas generally there is an exemption from having compliant health insurance. To qualify for the exemption you must qualify to exclude your foreign earned income from US tax, either using the physical presence test or the bona fide resident test. Even if you elect not to exclude your foreign earned income form US tax because you have a low income or because you claim a foreign tax credit, if you would have qualified for the exclusion you still qualify for the overseas exemption. You have to submit an additional form with your 2014 tax return to claim the exemption (IRS Form 8965, Health Coverage Exemptions).
If this is your first year overseas the exemption begins in the month you arrive overseas. If you didn’t have compliant health insurance for the first part of 2014 you may be subject to a shared responsibility payment, which looks a lot like a tax and is computed and paid with your 2014 tax return.
If you had employer provided insurance for the first part of 2014 you had qualified insurance and are not subject to a penalty. If you purchased insurance on your own, either directly through an insurer or through the federal or a state exchange you are considered to have had qualifying insurance. Otherwise you are subject to the shared responsibility payment. In any of the cases above you still must submit IRS Form 8965 with your 2014 tax return, showing the months you had qualified coverage and the months you were exempt.
If you purchased health insurance through a government exchange and received a subsidy because your estimated income fell within the levels qualifying you for a subsidy you should receive a form showing the cost of the insurance for each month covered and the amount of the subsidy (IRS Form 1095-A). In that case you will have to file both IRS Form 8965 and IRS Form 8962, Premium Tax Credit. The IRS Form 8962 is used to determine if you have to pay back some of the advance payment credit or if you have an additional amount owed to you.
If you were in the US for the first part of the year, and if you didn’t have qualifying health insurance you will need to file both IRS Form 8965 and IRS Form 8962 to calculate the shared responsibility payment, which you pay when you file your tax return (or by April 15th if filing later, to avoid penalty).
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