Your budget and the Affordable Care Act

However you may feel about it, the Affordable Care Act (popularly known as Obamacare) is currently a part of your budgeting reality, especially if you don’t have health insurance through your employer. The Affordable Care Act is intended primarily to make health care more accessible and affordable, so that no American is without coverage.

This would theoretically seem like a good idea since people with health insurance are more likely to seek preventative care, which would help avoid some of the more catastrophic events that can occur when we ignore early warning signs. In order to get to that point, however, the Affordable Care Act requires that everyone sign up for health insurance.

Avoiding a penalty

The date to remember this year is February 15, 2015. That’s the deadline to buy insurance for 2015. Failure to do so by that date will result in a penalty of $325 per adult, or 2 percent of the total family income, whichever is higher.

That’s a steep penalty, so if you haven’t already purchased your insurance now’s the time to start looking. HealthCare.gov is probably the best place to start your search.

Exemptions to the rule

You can go without health insurance and avoid paying a penalty if you qualify for one of the following exemptions (courtesy of HeathCare.gov):

• You’re uninsured for less than 3 months of the year
• The lowest-priced coverage available to you would cost more than 8% of your household income
• You don’t have to file a tax return because your income is too low
• You’re a member of a federally recognized tribe or eligible for services through an Indian Health Services provider
• You’re a member of a recognized health care sharing ministry
• You’re a member of a recognized religious sect with religious objections to insurance, including Social Security and Medicare
• You’re incarcerated (either detained or jailed), and not being held pending disposition of charges
• You’re not lawfully present in the U.S.
• You qualify for a hardship exemption. (There are 14 listed potential hardship scenarios, so be sure to check out that full list if you feel that purchasing insurance is too much of a burden.)

Completing your taxes

January is the time of year when tax preparation companies start advertising their services quite heavily. You’ve probably noticed that this year tax prep services are highlighting the impact of the Affordable Care Act on your tax returns.

If you had health insurance through your employer in 2014, the impact of the ACA on your taxes will be minimal (basically just checking a box).If you had no health insurance in 2014, or if you received subsidies to help pay for your insurance, things will be a little trickier.

First of all, if you had no insurance last year, it’s going to cost you. Thankfully it won’t cost you quite as much as it will if you skip buying insurance this year. The penalties in 2014 were a bit lower - $95 per adult or 1 percent of family income for the year, whichever is higher. That will factor into your 2014 tax return, either by cutting into your refund, or by requiring a payment on your taxes.

If you received a subsidy to help pay for your ACA mandated health insurance last year your tax return will be a little more complicated. Essentially, your subsidy was based on an estimate of your expected income for 2014 – if you ended up earning more money than you estimated then you’ll have to pay back some of the subsidy you received. Conversely, if you underestimated your income then you may be entitled to some money coming back your way.

The Health and Human Services Department has said that it plans to release online tools within the next few weeks to help consumers understand how the ACA impacts their tax return. Additionally, consumers who purchased a health plan through a government-run health care exchange will supposedly be contacted directly, via email, phone, or text message, with "personalized information that is most relevant to their tax status."

Getting help

If the government-provided self-help tools aren’t sufficient, it may be prudent to speak to a tax professional prior to filing this year. If you don’t feel you can afford to use one of the larger, for-profit firms, there are usually a number of nonprofit, community organizations that offer free tax preparation assistance during tax season.

The IRS also offers the Volunteer Income Tax Assistance (VITA) program, which provides “free tax help to people who generally make $53,000 or less, persons with disabilities, the elderly and limited English speaking taxpayers who need assistance in preparing their own tax returns.” VITA volunteers are based all across the country – just use the locator to find a site near you.

Filing your taxes is only part of the equation, though. If you aren’t sure how you can fit a new health insurance bill into your household budget, give us a call. Our trained and certified counselors would love to help you create a new budget that balances your responsibilities and goals.

It’s hard to know what the future of the Affordable Care Act will look like, but in the meantime your best bet is to be as informed as possible about your options and requirements. Get expert advice when you need it. Good luck!