As 2024 winds down and the holidays approach, most of us are thinking about presents, family gatherings, and maybe squeezing in a few more vacation days. But here’s the reality: tax season is just around the corner. And for many business owners and individuals, understanding how the Affordable Care Act (ACA) impacts taxes can be as important as your holiday plans.
If you’re unprepared, your ACA-related taxes could leave you scrambling when you file. But don’t worry; with the right tips and strategies, you can make the most of the ACA Open Enrollment and ensure you get the best deal. Here’s what you need to know to stay ahead of the game for 2025.
Understanding the ACA Open Enrollment Period
Before we dive into the nitty-gritty of taxes, let’s talk about the ACA Open Enrollment Period. This is your once-a-year chance to sign up for a health plan through the Health Insurance Marketplace or to switch your current plan if it’s not serving you well.
- Key Dates: The ACA Open Enrollment for 2025 started on November 1, 2024, and ends on December 15, 2024. Mark it on your calendar!
- Why It Matters: If you miss this window, you can’t sign up for a new plan unless you qualify for a Special Enrollment Period (SEP) due to a life event like moving, getting married, or losing job-based coverage.
Even if you had coverage last year, it’s worth reviewing your options. Re-evaluating your plan during this period could save you money and ensure you’re adequately covered.
Choosing the Right Health Plan
Selecting the right health insurance plan can feel overwhelming. But don’t worry; the right fit will depend on your healthcare needs and budget. Here’s how to get started:
- Consider Your Health Needs: Do you need frequent doctor visits, or are you mostly healthy? Your coverage should reflect your needs. For example, a plan with a more extensive network might be a good choice if you expect to visit specialists regularly.
- Understand Your Options: There are different types of plans, such as PPOs (Preferred Provider Organizations) and HMOs (Health Maintenance Organizations). Ensure you understand what each plan covers alongside the included networks.
- Budget Wisely: Look closely at the premium costs, deductibles, and out-of-pocket expenses. A cheaper monthly premium could come with higher deductibles, so balance affordability with adequate coverage.
Premium Tax Credits and Subsidies
One of the best aspects of the ACA is that you may qualify for premium tax credits. These subsidies help lower your monthly premium costs, making healthcare more affordable.
- Who Qualifies?: If your household income falls between 100% and 400% of the federal poverty level, you’re likely eligible for these credits.
- How It Affects Taxes: These credits are applied to your monthly premiums, but at tax time, you may need to reconcile the amount you received with your actual income. If your income was higher than expected, you might have to pay some back. If it was lower, you may get additional credits.
Be sure to estimate your income accurately when applying for the Marketplace so you don’t get a surprise tax bill later.
Avoiding Penalties for Not Having Coverage
While the federal penalty for not having insurance was eliminated in 2019, some states still impose their penalties for not having coverage. States like California, Massachusetts, and New Jersey still enforce penalties for uninsured individuals.
- What You Can Do: If you live in one of these states, ensure you maintain coverage to avoid penalties when you file your taxes. If you miss the ACA Open Enrollment period, check if you qualify for SEP coverage.
Medicaid and CHIP: Are You Eligible?
You may qualify for Medicaid or the Children’s Health Insurance Program (CHIP) if you’re on the lower income spectrum. These programs are available year-round, so you don’t need to wait for Open Enrollment to apply.
- How to Apply: Visit your state’s Medicaid website to determine eligibility. These programs provide free or low-cost coverage for eligible individuals and families.
What You Need to Know for Tax Filing
When it comes time to file your taxes in 2025, there are a few things you need to keep in mind:
- Form 1095-A: If you bought insurance through the Marketplace, you’ll receive Form 1095-A. This form reports your coverage for the year; you’ll need it to file your taxes.
- Premium Tax Credit Reconciliation: If you received premium tax credits, you’ll need to reconcile the amount you received with your actual income on Form 8962.
- Penalty for No Coverage: If you don’t have coverage and live in a state with penalties, you may be required to pay when you file your taxes.
Handling Changes in Your Circumstances
Life happens, and you may need to update your health insurance due to planned or unplanned events. Whether you’re getting married, having a baby, or changing your income, be sure to update your Marketplace information.
- How to Update: Report any changes within 30 days to avoid potential issues with your coverage or tax credits. These updates can also prevent surprises at tax time.
Deductions for Self-Employed Individuals
If you’re self-employed, deducting your health insurance premiums from your taxes may be an option. This applies if you purchase coverage through the Marketplace or other qualifying plans.
- How to Maximize Deductions: If you’re self-employed, consult a tax professional about maximizing your deductions and reducing your taxable income.
Bottom Line
Navigating the Affordable Care Act can be complicated, but with the right knowledge, you can save money and avoid surprises at tax time. Whether you’re picking a plan, securing premium tax credits, or avoiding penalties, make sure you take the time to understand your options during the 2025 ACA Open Enrollment Period.
Remember, a little bit of tax planning now can save you big down the road. If you need help with taxes, health insurance options, or making sure you’re compliant, don’t hesitate to contact Tax Goddess. We have helped business owners claim over $1.68 BILLION in tax savings, and we would love to help you, too. Your health—and your taxes—deserve your attention this year!
If you lose up to $100k in tax payments yearly, we can help you pay much less legally. Let’s chat about how much you can really save in a FREE CONSULTATION.
