IRS Form 8965: How to Claim a Health Coverage Exemption

Not long ago, going without health insurance didn’t just mean taking a risk—it also meant paying the IRS. Under the Affordable Care Act (ACA), taxpayers without full-year coverage faced the “shared responsibility payment,” unless they qualified for an exemption.

That’s where Form 8965 came in. Filing the form allowed taxpayers to claim a health coverage exemption and avoid the penalty.

The rules have since changed. Beginning with the 2019 tax year, the federal penalty dropped to $0, which means Form 8965 is now obsolete for federal purposes. But it hasn’t disappeared entirely—if you’re amending older returns, Form 8965 may still be part of your filing checklist.

What is IRS Form 8965?

IRS Form 8965 was the form used to claim exemptions from the Affordable Care Act’s penalty for not having health insurance coverage. While the form is now retired at the federal level, it played an important role for taxpayers who didn’t maintain minimum essential coverage for themselves or their tax household.

Here’s how it worked:

• Part I – Marketplace exemptions: Listed exemptions granted through healthcare.gov or a state marketplace, each identified by an exemption certificate number.
• Part II – Return-based exemptions: Claimed directly on the Form 1040 without going through the marketplace—for example, low household income, membership in a health care sharing ministry, or certain hardship cases.
• Part III – Family member exemptions: Broke down coverage month by month for each person in the tax household, requiring Social Security numbers and exemption codes.

These exemptions recognized situations like membership in a recognized religious sect, financial hardship, or gaps in coverage that the IRS treated as reasonable. In many cases, they worked alongside the premium tax credit to make health insurance more affordable for U.S. citizens and residents.

Who needed to file Form 8965?

Form 8965 was required for taxpayers whose gross income was above the federal filing threshold and who went without health insurance for one or more consecutive months in a given tax year. Filing the form let you claim an exemption and avoid the shared responsibility payment.

Common types of health coverage exemptions included:

• Affordability exemptions: When the lowest-priced healthcare coverage available exceeded a set percentage of household income.
• Religious or tribal membership: Members of certain recognized religious groups or federally recognized Indian tribes.
• Hardship exemptions: Serious circumstances such as domestic violence, eviction, foreclosure, or major medical expenses that made coverage unrealistic.
• Short coverage gaps: Exemptions for brief lapses—fewer than three consecutive months without insurance.
• Marketplace-granted coverage exemptions: Specific cases where healthcare.gov or a state marketplace issued an exemption certificate.
• Special cases: Membership in a federally recognized Indian tribe, incarceration, or certain eligibility issues with Medicaid, Medicare, or marketplace health plans.

Do you still need Form 8965 today?

For federal taxes, Form 8965 is obsolete. The penalty for not having health insurance was reduced to $0 starting with the 2019 tax year, so the form is no longer required for current filings.

Here’s the breakdown:

• No longer used federally: From 2019 onward, you cannot and do not need to file Form 8965.
• State mandates use different forms: States like California, Massachusetts, New Jersey, Rhode Island, and the District of Columbia enforce their own coverage rules, but they require state-level exemption forms—not Form 8965.
• Still relevant for older years: If you’re amending a federal income tax return for 2018 or earlier, you may still need Form 8965 to properly claim an exemption.

Health coverage exemptions made simple

Form 8965 may no longer be part of your annual filing, but it played an important role for taxpayers who went without health insurance in earlier years. Today, it’s relevant only if you’re amending older federal returns—or if you live in a state with its own mandate and exemption process.

Navigating these rules can feel complicated, especially if you’re balancing multiple tax years or state-specific requirements. That’s where expert guidance makes all the difference. At Bright!Tax, our expat-focused CPAs help U.S. taxpayers worldwide manage exemptions, filings, and every curveball the IRS throws their way. Get in touch today and let us take the guesswork out of your tax filing.

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