What is a Hardship Exemption?
Editor’s Note:. Previously, you could qualify for a Marketplace hardship exemption – which means you didn’t have to pay a healthcare penalty. Here’s a closer look at some exemptions that are a little more complicated.
Whether or not you took advantage of buying health care through the federal Marketplace, you may have to deal with some parts of the Affordable Care Act (ACA) when filing your taxes.
Before 2019, some people could qualify for hardship exemptions on their taxes, which shielded a person from incurring a healthcare penalty.
Beginning in 2019, there is no longer a healthcare penalty. However, if you are age 30 or older and want to buy a catastrophic health plan, you will need to apply for a hardship exemption to qualify.
What is a Marketplace Hardship Exemption?
Hardship exemptions are tough life situations that have aided in preventing you from getting health insurance. For some of these hardships, you’ll have to include proof of the situation in your application, such as a notice from a power company that your utilities were shut off. For others, like homelessness, you won’t have to provide documentation.
Here was the previous types of Marketplace hardship exemptions and corresponding paperwork you needed to provide:
| # | Hardship Exemption | Example Documentation Needed |
| 1 | You were homeless. | None. |
| 2 | You were evicted in the past six months or were facing eviction or foreclosure. | Eviction or foreclosure notice within the last three years. |
| 3 | You received a shut-off notice from a utility company. | Shut-off notice from a utility company that states service has or will be shut-off. |
| 4 | You recently experienced domestic violence. | None. |
| 5 | You recently experienced the death of a close family member. | Death certificate, death notice from newspaper, funeral service program, funeral expenses, coroner’s report, military notification of death, or other official notice of death. |
| 6 | You experienced a fire, flood, or other natural or human-caused disaster that caused substantial damage to your property. | Police or fire report, insurance claim, or other document from government agency, private entity, or news source about the event. |
| 7 | You filed for bankruptcy in the last three years. | Official bankruptcy filing documents from a date within the last three years. |
| 8 | You had medical expenses you couldn’t pay in the last 24 months that resulted in substantial debt. | Medical bills from a date within the last 24 months. |
| 9 | You experienced unexpected increases in necessary expenses due to caring for an ill, disabled, or aging family member. | Receipts for bills or services related to care, like medical bills, home care services, or transportation receipts. |
| 10 | You expect to claim a child as a tax dependent who’s been denied coverage in Medicaid and CHIP, and another person is required by court order to give medical support to the child. In this case, you don’t have the pay the penalty for the child. | Court order that covers the time period for which you want the exemption AND copies of eligibility notices for Medicaid and CHIP which show that the child has been denied coverage. |
| 11 | As a result of an eligibility appeals decision, you’re eligible for enrollment in a qualified health plan (QHP) through the Marketplace, lower costs on your monthly premiums, or cost-sharing reductions for a time period when you weren’t enrolled in a QHP through the Marketplace. | Notice of appeals decision. |
| 12 | You were determined ineligible for Medicaid because your state didn’t expand eligibility for Medicaid under the Affordable Care Act. | Notice of denial of eligibility for Medicaid. The notice must be from a date during the time period for which you’re requesting the exemption. |
| 13 | For tax years before 2017: your individual insurance plan was cancelled because it didn’t meet Affordable Care Act requirements and you believe other Marketplace plans are unaffordable. | Notice of cancellation from the insurance company. |
| 14 | You experienced a hardship that kept you from getting health insurance that’s NOT listed in categories #1-13; | Documents substantiating the hardship if available. |
Hardship exemptions didn’t prevent you from being subject to the penalty for the entire year. Instead, the exemptions will only cover you for the period immediately surrounding the underlying event.
When you Apply for a Marketplace Hardship Exemption, Here’s What will Happen:
In the past, if you qualified for a hardship exemption, you would have been issued a unique Exemption Certificate Number (ECN). Each member of your household would have received a unique ECN. For tax year 2018 and going forward, you may have been able to claim a hardship exemption directly on your tax return without applying for an ECN.
Healthcare Hardship Exemption Form
Previously, you would have completed IRS Form 8965, “Health Coverage Exemptions,” which was filed with your tax return.
Do You Still Need to Worry About Health Care Coverage Exemptions?
In tax year 2020-2021 you don’t need to worry about applying for any healthcare coverage hardship exemptions unless you are age 30 or older and want to apply for a catastrophic policy. For now, no healthcare penalties exist.
What If I Still Need Tax Help?
Healthcare tax form 1095 is still required to be issued by your health plan or employer, so it’s important to stay up to speed on your requirements. With many ways to file your taxes, H&R Block can help!
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