Don't Forget These ACA Exemptions

Many have been talking about the challenges of ACA for tax preparers. Now that the season is well under way, the challenges may not seem that formidable. My experience is that most people have coverage or have exemptions based on filing threshold.  However, there are other exemptions that you might encounter. You just need to recognize them. I'm listing a few of them in familiarity order, so you may want to scan to the bottom to see the ones that may not be so familiar to you.

Filing Threshold

The exemption that I see most often is based on filing threshold. A taxpayer's filing threshold is based on their filing status and age. For a single person not filing as head of household the threshold is $10,200. For a couple over age 65 married filing jointly the threshold is $22,700. Since the filing threshold doesn't go up with more exemptions, families are less likely to qualify for this exemption.


Another common exemption is the one that is often identified by the ITIN number the taxpayer is using to file their tax return. Although not all persons using a ITIN are in the country illegally that is the most common scenario. For example, if their photo identification is a passport then they may be in the U. S. legally and thus subject to ACA.

Short term coverage gap

The short term coverage gap does comes up regularly. While the threshold and ITIN exemptions are for the year, the short term coverage gap is calculated monthly, and the taxpayer is only exempt for the first coverage gap that lasts less that three months. Keep in mind that a person is considered covered if they have insurance for at least one day in the month. There are other rules related to this exemption.

Delayed coverage

Similar to the short term coverage gap is a period without coverage that is due to a delay caused by the Marketplace. If you purchased insurance through the marketplace but there was a delay at the beginning of 2014 you can claim this hardship exemption for those months.

Unaffordable Coverage

Another exemption based on income is the unaffordable coverage exemption. This one comes in different flavors. It may be the result of an employer's hike in insurance participation costs. The form instructions explain this exemption and may require you to use a worksheet to calculate the amount you should be able to afford. In general, it is 8% of income.

Federal Poverty Level

The one that may escape scrutiny is based on the Federal Poverty Level (FPL). In some states, like Texas, this may be an important consideration. For states like Texas that did not expand Medicaid, the exemption is 138% of FPL. You can claim a coverage exemption for yourself or another member of your tax household for 2014 if:

Your household income is less than 138% of the federal poverty line for the number of individuals in your tax household, not including any dependents you did not claim; and

At any time in 2014 the individual resided in Alabama, Alaska, Florida, Georgia, Idaho, Indiana, Kansas, Louisiana, Maine, Missouri, Mississippi, Montana, North Carolina, Nebraska, New Hampshire, Oklahoma, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, Wyoming, or Wisconsin.

I couldn't find an IRS table that lists the amounts so I created this one and it matches tables published by others.

Family Size


138% of FPL

























For a family of four, the exemption is $32,499. The filing threshold may only be 20,300. One caveat is that household income must include all social security benefits.

There's Gotta Be An Exemption For Me

There are many other obscure exemptions that the taxpayer may be able to claim so review them (from IRS sources) each time a taxpayer is subject to the penalty.

Note: This post doesn't cover all the rules related to each exemption so you should read the publications and instructions for any qualifications or exceptions.

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