From a federal perspective, tax year 2018 was the last year that the Affordable Care Act’s individual Shared Responsibility Payment applied when you filed your return. This fee, otherwise known as the individual mandate, was collected for plan years through 2018 from taxpayers who could afford health insurance but chose not to buy it. Starting in tax year 2019, the Shared Responsibility Payment no longer applies.
While many freelancers may be off the hook in this regard, depending on where you live, you may be subject to a new individual health insurance mandate enacted by your state. Several states are introducing this new legislation, which requires you to have qualifying health coverage — or to pay a fee in lieu of it — with your state taxes for the 2019 plan year.
So far, the states introducing individual mandates include:
- California (starting in 2020)
- the District of Columbia
- New Jersey, and
- Vermont (starting in 2020)
Some other states that are considering it are:
- Rhode Island, and
If you live in a state that requires you to have health coverage and you don’t have coverage (or an exemption), you will likely be subject to a fine. For example, The Massachusetts Department of Revenue recently announced their penalty schedule for individuals who fail to comply in tax year 2019 with the requirements under the Massachusetts Health Care Reform Act (the Act).
In Massachusetts, The Act requires most adults 18 and over with access to affordable health insurance that meets the State’s minimum creditable coverage standards to obtain it. If they don’t, penalties will be imposed through the individual’s personal income tax return, not exceeding 50% of the minimum monthly insurance premium for which an individual would have qualified through the State’s health insurance marketplace.
Massachusetts, like many states, does provide concessions for people who cannot afford health insurance based on specific poverty guidelines. The State of Massachusetts also gives individuals the opportunity to file appeals if they feel they suffer from hardship that prevents them from purchasing health insurance.
Now that the federal individual mandate for health insurance has been sunset, you should check with the state where you live to see if you must comply with a state-level health insurance mandate to avoid penalties. Even if your state hasn’t enacted this type of legislation yet, it’s a real possibility that other states will follow the lead of those that have, so be sure to keep checking for updates as the year progresses.
Jonathan Medows is a New York City based CPA who specializes in taxes and business issues for freelancers and self-employed individuals across the country. He offers a free consultation to members of Freelancer’s Union* and a monthly email newsletter covering tax, accounting and business issues to freelancers on his website, http://www.cpaforfreelancers.com — which also features a new blog, how-to articles, and a comprehensive freelance tax guide.
Jonathan is happy to provide an initial consultation to freelancers. To qualify for a free consultation you must be a member of the Freelancers Union and mention this article upon contacting him. Please note that this offer is not available March 1 through April 18 and covers a general conversation about tax responsibilities of a freelancer and potential deductions. These meetings do not include review of self-prepared documents, review of self-prepared tax returns, or the review of the work of other preparers. The free meeting does not include the preparation or review of quantitative calculations of any sort. He is happy to provide such services but would need to charge an hourly rate for his time.