Tax Guide

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
Ines Zemelman, EA
20 January 2020

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 ACA 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.

One of the aspects of the ACA is that you and the members of your family must maintain a health insurance policy which 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.

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.

If you are able to pass 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 be exempt from the requirement to have minimum essential coverage. 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 penalties for failure to.

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