Household Income Below Filing Threshold
A taxpayer is exempt from the requirement to have minimum essential health care coverage and is not subject to the Shared Responsibility Payment if either their Household Income or their Adjusted Gross Income is deemed below the filing threshold for their applicable filing status.
For 2017, the filing threshold exemption amounts are the following:
Single – $10,400 ($10,350 in 2016; $10,300 in 2015)
Head of Household – $13,400 ($13,350 in 2016; $13,250 in 2015)
Married Filing Jointly – $20,800 ($20,700 in 2016; $20,600 in 2015)
Married Filing Separately – $4,050 ($4,050 in 2016; $4,000 in 2015)
Qualifying Widow(er) with dependent child – $16,750 ($16,650 in 2016; $16,600 in 2015)
If the taxpayer and/or spouse is 65 or older, the filing threshold amounts are higher.
To claim a filing threshold coverage exemption, the taxpayer must first determine Household Income as this term is defined for the purposes of Form 8965. This definition of Household Income is not the same as the definition of Household Income that is used to calculate eligibility for the Net Premium Credit on Form 8962.
For filing threshold exemption purposes, household income is considered the taxpayer’s modified adjusted gross income which is their adjusted gross income (AGI) plus certain other items from the tax return. If the taxpayer files a Form 1040, they can figure their modified adjusted gross income by adding to their AGI, any amounts reported on Form 1040 for tax exempt interest. If the taxpayer claimed the foreign earned income exclusion, housing exclusion, or housing deduction, the taxpayer also adds those amounts from Form 2555. The taxpayer must also include in household income the modified adjusted gross income of each individual in the taxpayer’s tax household whom the taxpayer claims as a dependent but only if that individual is required to file a tax return because his or her income meets the income tax return filing threshold. If the dependent claimed on the taxpayer’s return did not have to file a tax return, then their income is not included in the household income calculation for the purposes of a filing threshold exemption on Form 8965. (This calculation is different than what occurs when determining the household income for the purpose of the Net Premium Credit on Form 8962.)
To enter Household Income from the Main Menu of the Tax Return (Form 1040) select:
Other Taxes Menu
Health Coverage Exemptions/Responsibility Payment (8965)
Part III –Shared Responsibility Payment
Household Income
Select the applicable income items from the dependent’s tax return and enter the amounts. The income items from the taxpayer’s return (tax exempt interest, Form 2555 items) will automatically be pulled to the Household Income Menu and the Household Income will be calculated by the program.
If the taxpayer is eligible for a Household Income filing threshold exemption, the program will automatically mark the return as exempt from the Shared Responsibility Payment and everyone on the return will be exempt from any responsibility payment or penalty.
Gross Income Below Filing Threshold
If the household income exceeds the filing threshold amounts, the taxpayer may still claim a filing threshold exemption if their adjusted gross income on the tax return is below the filing threshold for their filing status. The program does not automatically mark the return as eligible for the Adjusted Gross Income filing threshold exemption, but if the taxpayer whose gross income is less than the filing threshold has chosen to file a tax return they may elect the filing threshold exemption. The Adjusted Gross Income Filing Exemption is entered in the program from the Main Menu of the Tax Return (Form 1040) by selecting the following:
Other Taxes Menu
Health Coverage Exemptions/Responsibility Payment (8965)
Gross Income Below Filing Threshold Hardship Exemption
Select ‘Yes’ to the question that you are claiming the gross income filing threshold hardship election.
NOTE: This is a guide on entering Household Income and the Filing Threshold Coverage Exemptions into the Keystone Tax Solutions program. This is not intended as tax advice.