10/08/2014 05:04 pm ET Updated Dec 08, 2014

20 Million Americans Could Qualify to Waive the ACA Tax Penalty. Are you Exempt?

The Affordable Care Act (ACA) is a top buzzword in today's news, but does it really affect you? The law is designed to make sure everyone purchased minimum essential health insurance by March 31, 2014 and imposes a tax penalty for those who were required to purchase health insurance, but did not. If you already have health insurance through an employer, Medicare, Medicaid, or your parents then you probably already met the requirement to have minimum essential health insurance under the Affordable Care Act.

Come tax time, most Americans will have to answer a simple yes or no question on their tax return to prove they have health coverage. In some cases, taxpayers may be exempt from purchasing health insurance and a tax penalty.

Exemptions from the Affordable Care Act

So did you know that an estimated 20 million Americans might qualify to waive the tax penalty when they file their 2014 taxes? Yes, and in fact, there are about 30 reasons you may be exempt from the penalty for not having insurance when you file your 2014 taxes in 2015. Exemptions cover a variety of scenarios from followers of particular religious groups to those who take home a lower income and are not required to file a tax return by the IRS.

Find out if you are Exempt

Not sure if you're exempt from the tax penalty? Check out the TurboTax Exemption Check, a free, online tool that let's uninsured Americans determine whether they are eligible to waive the tax penalty entirely and apply for an exemption.

According to TurboTax data, the top five exemption categories are:
  • I can't afford health insurance. The lowest-priced coverage available costs more than 8 percent of my household income
  • I had difficulty signing up for health insurance through a state or federal marketplace
  • I had medical expenses that I couldn't pay in the last 24 months that resulted in substantial debt
  • I had an individual insurance plan cancelled, and other marketplace plans are unaffordable
  • I received a shut off notice from a utility company
Other exemptions are given to those who have recently experienced homelessness, eviction, foreclosure, bankruptcy, the death of a close family member or an experience with domestic violence.

I Think I am Exempt, Now What?

If you have been uninsured for less than three consecutive months of the year, aren't lawfully present in the U.S., or your income doesn't meet IRS filing requirements, you can apply for your exemption when you are filing your 2014 taxes.

For all other exemptions, you will have to apply for an exemption through the Health Insurance Marketplace well before tax-time since the Marketplace has to approve your application and you need to provide documentation to verify your claim. Each exemption is different, so be sure to apply with the right form. Once approved, the Marketplace will issue an exemption certificate number that is required when you file your taxes.

Timing is very important, as approval of your exemption may take a couple of weeks. So apply for your exemption as soon as you can to make it easy to file your taxes as soon as e-file opens.

I am not Exempt, Now What?

If you are not exempt under the Affordable Care Act, a tax penalty will be assessed when you file your 2014 taxes. The exact amount is based on family size and household income, and increases each year. Specifically for 2014, the penalty is $95 per adult or one percent of income, depending on your income. The TurboTax Healthcare Calculator can help you estimate your potential tax penalty.

2015 Open Enrollment

Lastly, if you are looking ahead at health coverage for 2015, open enrollment begins this November 15th. So stay tuned for ongoing news as the 2015 season gears up.

And just remember, the Affordable Care Act is aimed at making sure Americans have minimum essential health insurance, but there are many resources, exemptions, and tools out there to help.

How To Know If You're Covered