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Tax Issues for Immigrants under the Affordable Care Act

Authored By: Northwest Justice Project - CLEAR Intake Line LSC Funded
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We answer some common questions about the requirement to have coverage and tax issues for immigrants.

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Intro

The Affordable Care Act (ACA) requires most U.S. citizens and lawfully present immigrants to have basic medical coverage for themselves and their dependents.  We call this requirement “the individual mandate.”  If you do not have basic medical coverage, you may have to pay the Internal Revenue Service (IRS) a penalty—at least until you file your taxes in 2020.

In 2018, the President signed a new tax bill into law.  It keeps the individual mandate in place, but repeals (cancels) the tax penalty for not having a minimum level of health insurance for yourself and any dependents. The penalty repeal does not take effect until you file your tax return in 2020 (for tax year 2019).  Taxes and the Affordable Care Act has more info.

Some people are exempt from this requirement to have coverage, including immigrants not considered lawfully present under the ACA.  Health Care Reform:  Immigrant Eligibility has a list of immigrants considered lawfully present.

*We answer some common questions about the requirement to have coverage and tax issues for immigrants.  This is general info only.  Get advice from a qualified tax preparation service about your situation. 

I am not in a lawfully present immigration status. How can I show I am exempt from the requirement to have medical coverage? 

You must file IRS Form 8965 with your federal income tax return to claim this exemption.  Different codes list the exemptions.  Exemption code “C” includes citizens who live abroad and some noncitizens who do not need to have health insurance.  You should indicate this exemption applies to you. You will not have to disclose your immigration status. 

I have an individual taxpayer identification number (ITIN) instead of a social security number. Am I exempt from the requirement to have medical coverage?

Maybe not!  Some immigrants considered lawfully present under the ACA are not eligible for social security numbers. They may use an ITIN instead.  This may include, for example, certain domestic violence survivors and some individuals with non-immigrant status.

On the other hand, some immigrants eligible for social security numbers are exempt from the requirement to have medical coverage because they are not considered lawfully present under the ACA.  This includes persons granted relief under DACA (Deferred Action for Childhood Arrivals.)

*Health Care Reform:  Immigrant Eligibility has a list of immigration statuses considered lawfully present under the ACA.

What if I do not have to file a tax return because my income is too low?

If your income is below the tax filing threshold, you do not need to do anything to claim an exemption from the individual mandate.  You get an exemption automatically. 

*Note: If you bought a Qualified Health Plan (insurance) through the Washington Health Benefits Exchange (Healthplanfinder) and received tax credit to help pay your premiums, or you want to apply for tax credit, you MUST file a tax return. 

 

My spouse and I are not lawfully present. Do we need to have medical coverage for our children who are U.S. citizens or lawfully present?

Yes.  All parents must have medical coverage for their U.S. citizen and lawfully present children to avoid a possible tax penalty.  

You should get coverage for your children even if they are not lawfully present. Children from low- and moderate-income families can get free or low-cost coverage through the state, regardless of immigration status.

I live and work in the U.S. for a few months each year on a nonimmigrant visa.  Do I need to have health coverage?

Maybe.  If you do not live in the U.S. year round, you may be considered a “nonresident alien” for tax purposes.  Nonresident aliens are exempt from the requirement to have medical coverage.  For more info, see the IRS website at http://www.irs.gov/taxtopics/tc851.html.

To claim this exemption, you must file IRS Form 8965 with your federal income tax return.  Talk to a qualified tax preparer first. Make sure you are eligible.

*You can choose to buy insurance through Healthplanfinder anyway. You must meet state residency requirements. 

 

I work in the U.S. on a nonimmigrant visa. My spouse and children live outside the U.S. Can I get tax credits to help pay for health insurance I buy for myself through Healthplanfinder? 

Maybe.  If you are married, you can only get tax credits through Healthplanfinder if you file taxes jointly with your spouse. There are exceptions for domestic violence survivors and people who can file as “head of household.” 

To file as “married filing jointly” with your spouse, you both must be treated as residents for income tax purposes. The IRS will tax both your incomes for the entire year, even if you did not earn the income in the U.S. This may be worth it if you earned most of your income in the U.S. and your spouse earned little or nothing. Talk to a qualified tax preparer. 

If a child or other qualifying relative lived with you for more than half the tax year, you may be able to file taxes as “head of household.” Head of household filers are considered unmarried for tax purposes and can receive tax credits to help pay for insurance bought through Healthplanfinder without filing a joint return.

I filed an Affidavit of Support for my parents when they immigrated to the U.S.  Do I have to buy them health insurance?

No.  Filing an Affidavit of Support for any relative does not mean you must buy health insurance for them. 

*BUT! If you claim any relatives as dependents on your tax return, you may face a tax penalty if they do not have health insurance, unless they are exempt from the requirement to have coverage.

How will the IRS calculate my parents’ tax credits if I claim them as dependents on my tax return?

They will count the entire household income in calculating your parent’s tax credits.  If your parents file taxes on their own, only their income counts in calculating their tax credits. 

Where can I get help filing my taxes?

If you are low–income, you may be able to get free help from an IRS-approved VITA site. The IRS’ website has information about VITA sites at http://www.irs.gov/Individuals/Free-Tax-Return-Preparation-for-You-by-Volunteers, or call the IRS at 1-800-829-1040. 

 

This publication provides general information concerning your rights and responsibilities. It is not intended as a substitute for specific legal advice.
This information is current as of February 2018.

© 2018 Northwest Justice Project — 1-888-201-1014
(Permission for copying and distribution granted to the Alliance for Equal Justice and to individuals for non-commercial purposes only.)

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Last Review and Update: Feb 20, 2018
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