The Patient Protection and Affordable Care Act (ACA), aka Obamacare, came into effect in 2014. Some of the rules changed over the past few years, but it still affects your taxes. President Trump eliminated the penalty for non-coverage, but most of the Obamacare provisions still apply. This brief guide explains how the ACA affects your 2020 taxes, so you’ll know what to expect at tax time.
1. You may be eligible for tax credits
If you fulfill certain requirements, you can be eligible for the premium tax credit. A credit is the most beneficial way to reduce the amount of taxes that you will be responsible for paying. For example, you make $50,000 a year and after tax expenses and deductions you conclude that you owe $500 in taxes. A $400 tax credit could reduce the amount of taxes you owe to only $100. It’s important to talk to a competent tax professional to make sure that you’re eligible for this tax credit as it can help you save a substantial amount of money.
2. Documents to consider for tax filling
You should familiarize yourself with certain documents that specifically pertain to the new ACA laws. They are outlined below:
Tax Form 1095-A: Health Insurance Marketplace Statement
This form is an overview that states where you purchased your health insurance, whose covered and specific monthly information regarding your monthly premiums and related information.
Tax Form 8965: Health Coverage Exemption Form
If you did not purchase health insurance but have reasons as to why you did not purchase healthcare coverage, you may be eligible to avoid penalties. Use this form to determine if you are eligible to avoid penalties for noncompliance with ACA.
Tax Form 8962: Premium Tax Credit Form
As described above, if you fulfill certain criteria, you may be eligible for a premium tax credit, which can reduce the amount of taxes you end up paying.
Get Tax Help Now
Obamacare doesn’t cause as many tax issues as it used to, but it can still affect your return. No need to worry, the tax pros at Shared Economy Tax can help you navigate the challenges. Get started today with a one-on-one strategy session with one of our tax pros. You can also sign up for our free tax tips newsletter using the form below.