Why Your Health Insurance Matters at Tax Time

Why does your health insurance coverage matter at tax time? If you work for a company that issues W-2s, you might have also received a form called a 1095-A, the “Health Insurance Marketplace Statement.”

Why Health Insurance Matters at Tax Time | Cowdery Tax #taxes

Here is what you need to know.


The shared responsibility payment was suspended by the Tax Cuts and Jobs Act of 2017 starting with the tax year 2019. While you will still continue to receive a form 1095 with your annual tax documents, you are no longer required to submit the form as part of your tax return. You should, however, keep the form with your other tax documents records.

If your Family had Health Insurance through an Employer all Year

If you, your spouse and any tax dependents had coverage through an employer (yours or your spouse’s) all year, you have it easy! Form 1095-A will demonstrate this and you will be able to file your taxes with no further insurance questions.

If Someone in your Family was without Insurance for No More than 2 Consecutive Months

This is also easy. If someone was without insurance for 2 months or less, but was insured the rest of the time, you fall into what is called the “short gap” and also will not have to pay anything extra. You will need to fill out Form 8965 for an exemption, using Part III and entering the code of “B” in column c. You will need to specify for which months you are claiming this exemption.

If Someone in your Family was Without Insurance for More than 2 Consecutive Months

If this was the case, you will likely have to a pay a penalty based on the amount of time you were without health insurance. Penalties are calculated in two ways, and you pay whichever is higher.

Percentage of income method

One way the penalty is calculated is as a percentage of your household income above the tax-filing requirement. The penalty is 2.5% of your household income, and the maximum you will pay is the total average yearly premium price of the bronze-level plans in the Health Care Marketplace.

Individual method

The other way the penalty is calculated is per person. Under the per-person method, charges are:

  • Adults: $695 each
  • Children younger than 18: $347.50 each

The maximum penalty using this method is $2,085, and you will only pay for the number of people who did not have coverage.

If you were covered for some, but not all, of the year, you will pay the cost for uncovered months. The cost for each uncovered month is 1/12 of the total cost as calculated above. So, for an adult under the individual method who is uncovered for four months, the cost is $695, divided by 12, times 4, or about $232.

Need help?

Do you have questions about health insurance coverage and your taxes? Contact us today to schedule your appointment. Email Cinda@CowderyTax.com or call 740-374-6942, or simply fill in the form below.

This information is not intended as legal or tax advice. Cowdery Tax and its representatives does not offer legal or tax advice. We offer services for business bookkeeping, payroll, tax payments, and personal tax filings. We share information that is publicly available. Tax laws may change with or without notice that may alter or change the information contained in this publication.