Like resident taxpayers, U.S. taxpayers living abroad must complete Line 61 under “Other Taxes” and “Health care: individual responsibility” on their Form 1040 or equivalent. For 2016, the IRS will not consider a return complete and accurate if the taxpayer does not report health care coverage for the year, an exemption or a payment. However, U.S. citizens filing as non-residents in foreign countries while covered by an employee health plan, or even by a foreign country’s national health care system, have different considerations when complying with the requirements of the Affordable Care Act of 2010 (“ACA”).
How does this affect U.S. citizens filing as non-residents who are covered by an employee health plan or even by the national health care system in the country in which they currently reside?
Most U.S. citizens and resident aliens living abroad qualify for an exemption from the requirement of having qualifying health coverage. This exemption extends to individuals who have to file U.S. returns as non-resident aliens or who were non-resident aliens for any part of the tax year. Certain foreign health coverage might be treated as minimum essential coverage for purposes of the Affordable Care Act, but overseas filers generally rely on the exemption instead.
If you meet one of the following conditions, you qualify for this exemption even if you have a social security number (SSN). You qualify for an exemption if you are:
- A U.S. citizen or a resident alien who was physically present in a foreign country or countries for at least 330 full days during any period of 12-consecutive months;
- A U.S. citizen who was a bona fide resident of a foreign country countries for an uninterrupted period which includes an entire tax year;
- A bona fide resident of a U.S. territory;
- A resident alien who was a citizen or national of a foreign country with which the U.S. has an income tax treaty with a nondiscrimination clause, and you were a bona fide resident of a foreign country for an uninterrupted period that includes an entire tax year;
- Not lawfully present in the U.S .and not a U.S. citizen, or U.S. national (for this purpose, an immigrant with Deferred Action for Childhood Arrivals (DACA) status is not considered lawfully present and therefore is eligible for this exemption.);
- A nonresident alien, including (1) a dual-status alien in the first year of U.S. residency and (2) a nonresident alien or dual-status alien who elects to file a joint return with a U.S. spouse; or
- An individual who files Form 1040-NR, U.S. Nonresident Alien Income Tax Return, or Form 1040-NR-EZ, U.S. Income Tax Return for Certain Nonresident Aliens with No Dependents, (including a dual-status tax return for your last year of U.S. residency) or you are claimed as a personal exemption on one of those forms.
Taxpayers claim the exemption by filing IRS Form 8965 Healthcare Coverage Exemptions with their IRS Form 1040. Taxpayers living outside the U.S. and Puerto Rico qualify for an automatic extension until June 15, 2016. While there is no form required for filing to qualify for this extension, U.S. embassy websites advise taxpayers to write ‘Taxpayer Resident Abroad’ on the top of their tax return.
If you are an individual or business in the New York or Tri-State area and have any question about taxes, especially in planning ahead for the next filing season, call THE TAX EXPERTS at the Thorgood Law Firm www.thorgoodlaw.com. For a FREE consultation call 212-490-0704.
