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Exempt Individuals for the Individual Mandate

Individuals will be required to maintain minimum essential coverage beginning in 2014, also known as the individual mandate. This provision has not been pushed back. A tax professional can save time in answering questions or helping clients plan by first knowing who is exempt from the individual mandate.

  • Members of recognized religious sects that are exempt from self-employment tax.
  • Members of health care sharing ministries.
  • Individuals who are not U.S. citizens or nationals who are nonresident aliens or are present in the U.S. illegally.
  • Incarcerated individuals, other than those who are incarcerated after dispositions of charges. If the charges are pending, this exemption does not apply.
  • Members of Indian tribes.
  • Individuals with short coverage gaps which is generally less than three months.
  • Individuals whose household income is below the threshold for having to file an income tax return. Note that household income generally includes the income of all dependents claimed by the taxpayer. It’s possible to have no filing requirement, but not be exempt if the household income is over the threshold.
  • Individuals who cannot afford coverage based on his or her expected contribution being higher than 8% of his or her household income.
  • Individuals with a hardship exemption certificate. This is based on facts and circumstances when all the other exceptions don’t apply. This is based on the state marketplace determination, not the IRS.

Knowing these exceptions will not only show confidence in a relatively new law, but also build trust between the tax professional and the taxpayer. For more information on determining if your taxpayer qualifies to be exempted from the individual mandate, see §5000A, Reg. §1.5000A-3 and consult with our research service.

Featured in TAXPRO Weekly - July 25, 2013

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