From a federal perspective, tax year 2018 was the last year that the Affordable Care Act’s individual Shared Responsibility Payment applied when you filed your return. This fee, otherwise known as the individual mandate, was collected for plan years through 2018 from taxpayers who could afford health insurance but chose not to buy it. Starting in tax year 2019, the Shared Responsibility Payment no longer applies.
While many freelancers may be off the hook in this regard, depending on where you live, you may be subject to a new individual health insurance mandate enacted by your state. Several states are introducing this new legislation which requires you to have qualifying health coverage—or to pay a fee in lieu of it—with your state taxes for the 2019 plan year.
So far, the states introducing individual mandates include:
Some other states that are considering it are:
If you live in a state that requires you to have health coverage and you don’t have coverage (or an exemption), you will likely be subject to a fine. For example, The Massachusetts Department of Revenue recently announced their penalty schedule for individuals who fail to comply in tax year 2019 with the requirements under the Massachusetts Health Care Reform Act (the Act).
In Massachusetts, The Act requires most adults 18 and over with access to affordable health insurance that meets the State’s minimum creditable coverage standards to obtain it. If they don’t, penalties will be imposed through the individual’s personal income tax return, not exceeding 50% of the minimum monthly insurance premium for which an individual would have qualified through the State’s health insurance marketplace.
Massachusetts, like many states, does provide concessions for people who cannot afford health insurance based on specific poverty guidelines. The State of Massachusetts also gives individuals the opportunity to file appeals if they feel they suffer from hardship that prevents them from purchasing health insurance.
Now that the federal individual mandate for health insurance has been sunset, you should check with the state where you live to see if you must comply with a state-level health insurance mandate to avoid penalties. Even if your state hasn’t enacted this type of legislation yet, it’s a real possibility that other states will follow the lead of those that have, so be sure to keep checking for updates as the year progresses.
Jonathan Medows is a certified public accountant licensed in New York, New Jersey, Maryland, and Pennsylvania. He is also a recognized expert in taxation for freelancers and the self-employed—often tapped for his expert knowledge and perspective on self-employment taxation by national and regional publications such as The New York Post, BusinessWeek, Forbes taxation blog, WebCPA, CPA Practice Advisor, and others. You can read some of Jonathan’s press coverage here.
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