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Tax Exemptions and the Affordable Care Act

Hardship Exemptions From the Individual Mandate Penalty

Angel Rivera (L) and his wife Wilma Rivera sit with Amada Cantera, an insurance agent with Sunshine Life and Health Advisors as they try to purchase health insurance under the Affordable Care Act in Miami.
Angel Rivera (L) and his wife Wilma Rivera sit with Amada Cantera, an insurance agent with Sunshine Life and Health Advisors as they try to purchase health insurance under the Affordable Care Act in Miami.
Joe Raedle/Getty Images

Even the bureaucrats in Washington recognize that there are certain life situations in which it's difficult to buy health insurance. The Affordable Care Act (ACA) contains a long list of temporary exemptions to the individual mandate provision for people who have suffered serious hardships.

Qualifying hardships include [source:]:



  • Homelessness
  • Eviction, foreclosure or bankruptcy in the past six months
  • Domestic violence
  • Death or life-threatening illness of a close family member
  • Fire, flood or other natural disaster
  • Overwhelming medical expenses for yourself or a family member
  • A shutoff notice from a utility

Count yourself lucky if you don't qualify for any of those exemptions. The ACA also includes exemptions for people who fall between the cracks of the health care law as it's rolled out in individual states. For example, 23 states have not accepted federal funds to expand their Medicaid coverage to more low-income adults [source: Kaiser Family Foundation]. If you live in one of those states and would have been eligible for coverage under the rules of the expansion, you are exempt from paying the penalty [source:].

Other taxpayers tried to sign up for a plan using the online marketplace but were denied tax credits to help cover the costs. Through an appeals process, they eventually won approval for the credits. The ACA exempts such individuals from the penalty during the months they were uninsured and appealing their eligibility [source:].

A final category of exempt individuals had their catastrophic coverage plans cancelled by their provider and can't find an affordable substitute on the online marketplace. Catastrophic coverage plans have low monthly deductibles and serve to protect the insured from only the highest health care costs. If you qualify for this hardship exemption, you are excused from paying the penalty and you are given access to the lowest rate catastrophic plans in the marketplace [source:].

To claim any of these hardship exemptions, taxpayers need to complete and mail in a paper application to the health insurance marketplace. Some hardship exemptions require support documentation like a bankruptcy filing, a death notice, or a copy of a police or fire report. This claim should be done sooner rather than later because the taxpayer needs to receive an exemption certificate number from the marketplace to include with his or her federal tax filing.

For lots more information about the Affordable Care Act and other little understood changes to U.S. tax law, check out the related HowStuffWorks links below.

Author's Note: Tax Exemptions and the Affordable Care Act

Being a freelance writer has many perks, chief among them flexibility. I'm my own boss, so I can make my own hours, and the commute -- 13 steps from my bedroom -- is usually stress-free. But with all of that flexibility comes some costs, including the lack of an employer-sponsored health care plan. When the Affordable Care Act passed, I was excited at the possibility that I would have access to better private health insurance coverage at a lower monthly rate. Unfortunately, me and my family fell smack in the sweet spot (sour spot, more accurately) where we made just enough money not to qualify for tax credits to help pay for coverage. The result was a new plan with slightly worse coverage than my old one and for a slightly larger monthly fee. I'm glad that millions of uninsured Americans now have coverage under the ACA, but I'm bummed that my personal ACA story didn't have a happier ending.

Related Articles


  • Alliance of Health Care Sharing Ministries. "What is a Health Care Sharing Ministry?" (Nov. 12, 2014)
  • "Catastrophic Health Insurance Plans" (Nov. 12, 2014)
  • "Exemptions from the fee for having health coverage" (Nov. 12, 2014)
  • "The fee you pay if you don't have health coverage" (Nov. 12, 2014)
  • "Hardship exemptions from the fee for not having health coverage" (Nov. 12, 2014)
  • IRS. "Draft 1040 Instructions 2014" (Nov. 12, 2014)
  • IRS. "The Individual Shared Responsibility Provision" (Nov. 12, 2014)
  • IRS. "Individual Shared Responsibility Provision -- Calculating the Payment" (Nov. 12, 2014)
  • Kaiser Family Foundation. "State Decisions on Health Insurance Marketplace and Medicaid Expansion." Aug. 28, 2014 (Nov. 12, 2014)
  • Supreme Court of the United States. "National Federation of Independent Business et al. v. Sebelius, Secretary of Health and Human Services, et al." June 28, 2012 (Nov. 12, 2014)