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How You Are Affected by the Affordable Healthcare Act as a US Expat

How You Are Affected by the Affordable Healthcare Act as a US Expat

For the first time, United States Citizens are obligated to report information regarding health care coverage as well as their eligibility on their US income tax return. This is all because of the ACA (Affordable Care Act) which came into effect this year. The Affordable Care Act is an initiative for health care that ensures every American citizen has health insurance. Subsidies are offered to those who are unable to afford a plan. So how does the ACA work?

Update 2018

Under the new bill, the amount of the individual shared responsibility payment is reduced to zero, starting in 2019.

The ACA not only provides insurance to those who cannot afford it, it makes health coverage mandatory for all US Citizens

Do expats need Obamacare? Well, one of the aspects of the ACA is that you and the members of your family must maintain a health insurance policy that contains coverage consistent with at least the minimum essential coverage established by the act. Only those who qualify for an exemption may forego the qualified coverage. If you are not exempt and you don’t have health coverage, you will be facing penalties on your US expat tax return.

When and Where Can You Get Coverage?

If your employer does not offer healthcare coverage, or if the coverage does not comply with the healthcare standards that the ACA defines as “minimum essential coverage,” then you would need to secure health insurance for US expats through the healthcare marketplace during open enrollment.

This healthy insurance marketplace is an online service that lets you select health insurance plans from approved providers. You would register through your resident state. As an expat, you may not have a resident state, but if you do not qualify for the Foreign Earned Income Exclusion, the IRS considers you to be a resident of a US state. Use the state that you have the most connection to, with regards to family, property or other relevant connections.

Open enrollment in the marketplace is open for just three months—November 1 through January 31. After January 31st, only those that have gone through life changing events (i.e. marriage, divorce, birth and death of family members) can alter their insurance coverage.

It will not be difficult to report whether or not you are carrying a healthcare plan which meets the minimum essential coverage on your US tax return

The IRS has provided basic instructions for the manner in which your coverage status should be reported. The IRS states that the majority of taxpayers will do nothing more than check a box verifying that each family member had the required coverage for the year. It’s important to know if you have a qualifying plan or not. You may check to see if your health insurance plan qualifies at

A variety of taxpayers will either receive or qualify for advance distributions of the premium tax credit. These taxpayers may also see an increase in their tax refund. There may also be a decrease in the refund amount if the income which was reported as a qualification for the health care subsidy differed from that which was projected.

As a US Expat, you may want to pay special attention to this exemption section. Most likely, you are exempt from the mandate of coverage as a US Expat

How to get an ACA exemption? If you and your family are deemed bona fide residents by virtue of the Bona Fide Residence test or the Physical Presence test for your time overseas and you are eligible to take advantage of the Foreign Earned Income Exclusion on your US expat tax return, then you will enjoy exemptions to the affordable care act. If your health insurance policy is through a US expat plan, you are also exempt. Don’t stop there, though; there’s action you have to take.

You will be required to file Form 8965 with your US expat tax return when you file. If you fail to file this form, the IRS may assume that you are required to maintain an adequate policy and that you simply do not have coverage.

If the primary taxpayer lives abroad and qualifies for the foreign exemption, his family living stateside (wife, children and any other dependent listed on tax return) need to have their own U.S. health care coverage to avoid a tax penalty.

If you don’t meet the requirements that would make you exempt, you may be charged a penalty for the months during which you were in noncompliance

You may already be in violation of the ACA policy if you haven’t resided overseas long enough to qualify for the FEIE and you don’t have health insurance that meets the minimum requirements. There may be a penalty assessed on your US expat tax return. This isn’t as bad as it sounds. A small penalty will be assessed for every month that you went without coverage. If you had coverage for even one day in a calendar month, you are considered to have been covered for the entire month. Here are the penalties for failure to have required health insurance:

$95 for each adult and $47.50 for each child or 1% of your total income. This is the annual penalty amount. If you were only uninsured for a few months out of the year, the charge will be prorated. Penalties are said to be rising over the next two years.

Ines Zemelman, EA
Founder of TFX