Posted 4/10/18 / Affordable Health Insurance
“Short-Term Gap” in Health Coverage-Can-Help-Avoid Tax Penalty
If you had a short gap in qualified health insurance through the Affordable Care Act, also known as Obamacare, you might not have to pay the tax penalty when you file your 2017 taxes this year. This can get a bit complicated, so we’ve provided examples.
Here’s how the “short-gap” exemption works:
- If you or a family member went without health insurance for two consecutive months, you can claim this exemption.
- Healthcare.gov gives this example: You didn’t have coverage from March 2 to June 15. Because you were covered for two days in March and 15 days in June, you qualify for the exemption or two consecutive months: April and May.
You’re considered covered for any month you had minimum essential coverage, even one day.
- If your gap was three months or more, you can’t claim this exemption for any of those months.
- Example: You didn’t have coverage any day in April, May, or June. So, you can’t claim this exemption.
- If your coverage gap crosses calendar years, the months without coverage of the second tax year aren’t counted for the exemption for the first tax year. But the uncovered months from the first year are counted for the exemption for the second tax year.
- Example: Let’s say you didn’t have qualifying coverage November 2016, December 2016, and January 2017. You’re eligible for the short gap exemption for 2016. But for the 2017 tax year, you’re not eligible for the short gap exemption for January 2017 because you didn’t have coverage for three consecutive months – from November 2016 through January 2017.
- If you had two or more gaps in coverage during the year, you can claim the exemption only for the months of your FIRST coverage gap. This is true even if both gaps are less than three months.
- Example: You didn’t have coverage any day in May or any day in November or December. You can claim this exemption only for May.
So how does the cost of the penalty break down?
For every month you and your tax dependents didn’t have coverage, the penalty is by month, or 1/12 of the annual amount on your taxes. Of course, the “short-gap” rules (above) still apply.
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