Questions and answers on the individual shared responsibility provision

Through tax year 2018, if anyone in the taxpayer’s tax household did not have minimum essential coverage, and did not qualify for a coverage exemption, the taxpayer needed to make an individual shared responsibility payment when filing a federal income tax return.

Enacted in December 2017, the Tax Cuts and Jobs Act (TCJA) reduced the shared responsibility payment to zero for tax year 2019 and all subsequent years. For January 1, 2019 and beyond, taxpayers are still required by law to have minimum essential coverage or qualify for a coverage exemption. However, under the TCJA, you no longer need to  make a shared responsibility payment or file Form 8965 with your tax return if you don’t have minimum essential coverage for part or all of 2019.

Forms 1040 and 1040-SR for 2019 and 2020 do not not have the “Full-year health care coverage or exempt” box.

Reminder from the IRS: If you need health coverage, visit HealthCare.gov to learn about health insurance options that are available for you and your family, how to purchase health insurance, and how you might qualify to get financial assistance with the cost of insurance.

If taxpayers owe a Shared Responsibility Payment for tax years before 2019, the IRS may offset that liability with any tax refund that may be due to them. The IRS routinely works with taxpayers who owe amounts they cannot afford to pay. This sometimes includes enforced collection action such as liens and levies. However, the law prohibits the IRS from using liens or levies to collect any SRP. If taxpayers owe the SRP, the IRS may offset that liability with any tax refund that may be due to them.

Under the Affordable Care Act, the federal government, state governments, insurers, employers and individuals are given shared responsibility to reform and improve the availability, quality and affordability of health insurance coverage in the United States. The individual shared responsibility provision requires each individual to have qualifying health care coverage (known as minimum essential coverage) for each month. Through tax year 2018, taxpayers were also required to report health care coverage, qualify for an exemption from coverage, or make a shared responsibility payment for months without coverage or coverage exemption when filing his or her federal income tax return. 

The provision applies to individuals of all ages, including children. The adult or married couple who can claim a child or another individual as a dependent for federal income tax purposes is responsible for making the payment if the dependent does not have coverage or an exemption.

Minimum essential coverage includes the following:

• Employer-sponsored coverage, including self-insured plans, COBRA coverage and retiree coverage
• Coverage purchased in the individual market, including a qualified health plan offered by the Health Insurance Marketplace, health insurance offered by certain student health plans and catastrophic coverage
• Coverage under government sponsored programs including Medicare Part A coverage and Medicare Advantage plans
• Most Medicaid coverage
• Children's Health Insurance Program (CHIP) coverage
• Certain types of veterans health coverage administered by the Veterans Administration
• Most types of TRICARE coverage
• Coverage provided to Peace Corps volunteers
• Coverage under the Nonappropriated Fund Health Benefit Program
• Refugee Medical Assistance supported by the Administration for Children and Families
• Coverage through a Basic Health Program (BHP) standard health plan
• Coverage under an expatriate health plan
• Self-funded health coverage offered to students by universities for plan or policy years that begin on or before Dec. 31, 2014 (for later plan or policy years, sponsors of these programs may apply to HHS to be recognized as minimum essential coverage)
• State high risk pools for plan or policy years that begin on or before Dec. 31, 2014 (for later plan or policy years, sponsors of these program may apply to HHS to be recognized as minimum essential coverage)
• Other coverage recognized by the Secretary of HHS as minimum essential coverage

Minimum essential coverage does not include coverage providing only limited benefits, such as stand-alone vision and dental plans, workers' compensation cover-age, and coverage limited to a specified disease or illness.

Exemptions

• Religious conscience. You are a member of a religious sect that is recognized as conscientiously opposed to accepting any insurance benefits. The Social Security Administration administers the process for recognizing these sects according to the criteria in the law.
• Health care sharing ministry. You are a member of a health care sharing ministry.
• Indian tribes. You are (1) a member of a federally recognized Indian tribe or (2) an individual eligible for services through an Indian care provider.
• Income below the income tax return filing requirement. Your income is below the minimum threshold for filing a tax return. The requirement to file a federal tax return depends on your filing status, age and types and amounts of income. To find out if you are required to file a federal tax return, use the IRS Interactive Tax Assistant (ITA).
• Short coverage gap. You went without coverage for less than three consecutive months during the year.
• Hardship. You have suffered a hardship that makes you unable to obtain coverage, as defined in final regulations issued by the Department of Health and Human Services. See question 21 for more information on claiming hardship exemptions.
• Affordability. You can’t afford coverage because the minimum amount you must pay for the premiums is more than a certain percentage of your household income.
• Incarceration. You are in a jail, prison, or similar penal institution or correctional facility after the disposition of charges against you.
• Not lawfully present. You are not lawfully present in the U.S. and are not a U.S. citizen or U.S. national.

The vast majority of coverage that people have today is minimum essential coverage. For those who do not have coverage, who anticipate discontinuing the coverage they have currently, or who want to explore whether more affordable options are available, the Health Insurance Marketplace is open in every state and the District of Columbia. The Marketplace helps individuals compare available coverage options, assess their eligibility for financial assistance and find minimum essential coverage that fits their budget.

For more information about the Marketplace, visit the Health Insurance Marketplace website. For more information about financial assistance, see our questions and answers on the premium tax credit.

All U.S. citizens living in the United States are subject to the individual shared responsibility provision as are all permanent residents and all foreign nationals who are in the United States long enough during a calendar year to qualify as resident aliens for tax purposes. This category includes nonresident aliens who meet certain presence requirements and elect to be treated as resident aliens. For more information see Publication 519 PDF. 

Foreign nationals who live in the United States for a short enough period of time that they do not become resident aliens for federal income tax purposes are exempt from the individual shared responsibility payment even though they may have to file a U.S. income tax return. The IRS has more information available on when a foreign national becomes a resident alien for federal income tax purposes. Individuals who are exempt under this rule include:

• Nonresident aliens;
• Dual-status aliens in their first year of U.S. residency;
• Nonresident aliens or dual-status aliens who elect to file a joint return with a U.S. spouse;
• Individuals who file a Form 1040-NR or Form 1040-NR-EZ (including a dual-status tax return for their last year of U.S. residency); and
• Individuals who are claimed as a personal exemption on a Form 1040-NR or Form 1040-NR-EZ.

In addition, individuals who are not lawfully present in the United States and not U.S. citizens or U.S. nationals are exempt from the individual shared responsibility provision. 

Yes. U.S. citizens will need to maintain minimum essential coverage under the Affordable Care Act. For this purpose, minimum essential coverage includes a group health plan provided by an overseas employer and certain expatriate health plans.

All bona fide residents of the United States territories are exempt from the individual shared responsibility provision.

Yes. Employer-sponsored coverage generally is minimum essential coverage. (See question 5 for information on specialized types of coverage that are not minimum essential coverage.) If an employee enrolls in employer-sponsored coverage for himself and his family, the employee and all of the covered family members have minimum essential coverage.

No. You, your spouse and your dependent children do not have to be covered under the same policy or plan. However, you, your spouse and each dependent child for whom you may claim a personal exemption on your federal income tax return must have minimum essential coverage or qualify for an exemption, or you will owe a shared responsibility payment when you file a return.

Yes. Grandfathered group health plans are minimum essential coverage.

Yes. Retiree health plans generally are minimum essential coverage.

Yes. Employer-sponsored coverage is minimum essential coverage regardless of whether the employer is a governmental, nonprofit or for-profit entity.