How to file your taxes when you have Marketplace health insurance

Tax season can feel stressful, but it doesn’t have to be. Doing your taxes when you have a Marketplace health plan doesn't need to be worrisome.

Have a Marketplace health plan (also known as an Affordable Care Act or Obamacare plan) this year? Then here’s what to know about what information you’ll need when filing your taxes. 

Do you need documentation of your health insurance to file your taxes?

Starting in 2019, the individual mandate of the Affordable Care Act is no longer in effect. Because of this, it is no longer a requirement that you provide proof of health insurance coverage when you file your taxes. 

Regardless of whether you get your health insurance through your job or through the Marketplace, you’ll receive documentation in the mail that you use when filing your taxes.

Received subsidies (health insurance savings) on a Marketplace plan? Then you’ll need to file certain forms to keep those health insurance savings. You’ll need Form 1095-A, and you can get Form 1095-A here

Documentation needed for Marketplace plans with premium tax credits

If you or any members of your tax household are covered by Marketplace insurance that you received premium tax credits for, you will need to complete certain forms as part of your federal income tax return.

Qualified for and used premium tax credits on a Marketplace plan? Then you will complete what’s known as Form 8962 with your return. You will complete this using Form 1095-A, which provides information about your health insurance coverage. 

Marketplace plan holders should have received their Form 1095-A via U.S. mail in early 2020. If you enrolled in health insurance through HealthSherpa, you can log into your account and download your 1095-A form. If you enrolled through HealthCare.gov, you get Form 1095-A online here. It is best to wait to file your income taxes until you have received this form. You will use this form to reconcile those premium tax credits for your 2019 filing.

Documentation needed for Marketplace plans without premium tax credits 

Did you not receive premium tax credits for your Marketplace health plan on your monthly premiums in 2019?  You will also want to pay attention to your Form 1095-A. You should use 1095-A to complete Form 8962. I

Didn't receive premium tax credits on your premium but qualify for them? Then you may be eligible to claim these tax credits on your federal income tax return. 

Whether you received premium tax credits for your premiums in 2019 or not, wait to receive your 1095-A form. Once you do, you can then file your taxes.

With this form, you can complete Form 8962 and reconcile any premium tax credits received or owed back to you via refund. Filing your return without reconciling your advance payments will delay your refund and may affect future credit payments. 

Should I expect a tax refund if I have a Marketplace plan?

Have a Marketplace Obamacare plan? Then you may get a tax refund. But it depends on a number of things. 

If you qualified for premium tax credits and chose to have those applied to your monthly premiums, you will reconcile those tax credits on your Form 8962 with information from your Form 1095-A. After this, if the amount is less than the actual premium tax credit, you’ll get the difference back as a higher refund or lower tax due. But if the premium tax credits applied to your premiums were more than the actual credit, you may need to pay the difference as part of your tax return this year. 

Completing Form 8962 is essential for determining whether you will receive a refund or owe more in taxes if you have a Marketplace plan. 

If you have a Marketplace plan and qualified for premium tax credits but did not opt to have those applied to your 2019 premiums, you may claim the premium tax credit on your 2019 return. This will be done by completing Form 8962 using the information from Form 1095-A that you receive from the Marketplace. 

What is a Health Savings Account (HSA) and how will it affect my taxes if I have one?

How a Health Savings Account (HSA) works

A Health Savings Account (HSA) is a special kind of savings account wherein pre-tax dollars can be set aside for qualified medical expenses. All contributions to an HSA are in pre-tax dollars. Any earnings in an HSA, if invested, are tax free. 

Only those with a qualifying high-deductible plan are eligible to open an HSA, including those with Marketplace plans. High-deductible plans typically cover only preventive care services before the deductible is met. When shopping the Marketplace, you can search and look for plans that are HSA-eligible, and if you choose an HSA-eligible plan, you can open an HSA with Lively here.

For tax year 2019, a plan qualifies as high-deductible if it has a minimum deductible of $1350 for an individual and $2700 for a family. And for 2019, those with an HSA-eligible plan may contribute up to $3500 a year to an HSA for an individual or up to $7000 a year for a family, and you can contribute for 2019 up until April 15, 2020. 

Money in an HSA can be used for deductibles, copayments, coinsurance, and some other expenses. Because these dollars are not taxed, having an HSA can save money for those with high deductible plans. This is because of the combination of a high-deductible plan with low monthly premiums couples with health care costs being able to be paid through pre-tax dollars. 

Keep in mind that HSA funds are typically ineligible to pay monthly health plan premiums. 

Health Savings Account money and taxes

Money put into an HSA is always yours to keep, without any deadlines attached. Your HSA can outlive your time enrolled on a high-deductible plan, too. The pre-tax dollars put into an HSA can be invested and continue to grow tax-deferred, similar to 401k. 

If you wish to use the money in your HSA, keep in mind that the money will remain tax-free when used for any qualified medical expenses. 

If you are under the age of 65 and use the money for any other purposes, though, that money does become taxable income. And in that case, you may find yourself facing an additional 20 percent tax on the non-qualified medical use of your HSA money. 

After turning 65, you can use HSA money for anything, but you will need to pay taxes on any withdrawals that are not for qualified medical expenses.