The Affordable Care Act requires everyone to have health insurance, or face a penalty at tax time. There are some situations in which a person can be exempt from the penalty. Individuals who believe they qualify for a hardship exemption or a pre-defined exemption need to fill out Form 8965 (Health Coverage Exemptions) and file it with their federal tax return. With this form, taxpayers without health insurance can avoid being charged a penalty.

Different exemptions need to be requested at different times. Depending on the type of exemption you may need to request it through the Marketplace first or at the time when you file your return. There are a few exemptions that can be claimed at any time. If an exemption must be requested through the Marketplace, you have to apply and obtain an exemption certificate number before filing your tax return.

Marketplace Exemptions

The following exemptions need to be requested from the Marketplace before filing a tax return. You will need to provide your exemption certificate number.

• Religious exemption for members of a sect recognized as opposed to insurance benefits by the Social Security Administration
• Projected household income does not provide access to appropriate coverage affordability
• The state in which you reside has not revised their eligibility requirement for Medicaid, rendering you ineligible for coverage
• Current coverage is not renewed, and other options are less affordable.
• Circumstances prevent you from qualifying for coverage under a Marketplace Health Plan.

Form 8965 Exemptions

These exemptions can only be requested when you file your 2014 tax return using Form 8965:

• Health insurance coverage is unaffordable based on income
• A short gap in coverage applies
• Total income for the household is below the required threshold
• Individual is not present in the US under the terms of the law

Other Exemptions

There are exemptions that can be requested at any time, either through the Marketplace or when you file your taxes. They are:

• Incarceration
• Member of a health sharing ministry that is federally recognized
• You are of Native American or Alaskan Native descent, or a spouse of someone of this descent, and are eligible to receive health coverage through a special provider
• You are a member of Native American Tribe
• Coverage is deemed unaffordable
• Despite applying for coverage through the Marketplace, you have a short lapse of coverage in the beginning of 2014