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The 1095 tax form appeared on the scene after the Affordable Care Act passed. It helps ensure taxpayers, employers and insurers comply with certain provisions of the act.
The form includes important information about a taxpayer’s health insurance coverage — most people will get at least one of three versions of Form 1095. Some people may get more than one.
Read on to find out how these forms could be used to help you complete your tax returns.
What is a 1095 tax form?
Initially, when the forms were first put into use following the passage of the ACA, 1095s helped the IRS determine the following:
- Whether a taxpayer had health insurance as mandated by the ACA
- If an uninsured taxpayer should be subject to a shared responsibility payment for not having insurance
- If someone was eligible to receive tax credits, paid in advance, to help cover the cost of buying coverage from a marketplace insurer
Because the Tax Cuts and Jobs Act of 2017 set the penalty amount for not having insurance at zero, 1095 forms are now largely for information purposes — though two types of the form still play a role in determining advance premium tax credits.
Usually, you don’t need to do anything to get these forms delivered to you. They may arrive in the mail, or you may consent to receive them electronically. And for one of the forms (1095-A), you may need to log into your marketplace account at HealthCare.gov or your state marketplace website to get a copy.
When you receive the forms, you really only need to worry about them if you claimed advanced premium tax credits to help you afford insurance or if you could be eligible for these credits.
Three different types of 1095s
There are three different 1095 forms, all of which provide details on your qualifying health insurance coverage.
- 1095-A, Health Insurance Marketplace Statement — Health insurance marketplaces send this form to people who have purchased marketplace coverage. It states who is covered, what the monthly policy premiums are and what tax credits were provided to assist with paying for coverage.
- 1095-B, Health Coverage — This form is sent by employers and others who provide minimum essential coverage. Small employers who offer coverage but who aren’t required to will use this form.
- 1095-C, Employer-Provided Health Insurance Offer and Coverage — Employers who have at least 50 full-time employees must send out this form to each worker and to the IRS. It provides details on who has been offered employer-sponsored healthcare coverage, whether workers have chosen to take advantage of that coverage, and if so, what months you were or weren’t covered by the employer plan.
Why is the 1095 tax form important?
Form 1095-B and Form 1095-C help the IRS know who’s entitled to tax credits to help pay health insurance premiums. If you have coverage through an employer, you typically won’t qualify for the advanced premium tax credits that would help you buy a policy on Obamacare exchanges. The IRS also uses Form 1095-C to determine if a large employer (one with 50 or more full-time or full-time equivalent employees) is meeting the Obamacare requirement to offer employer-provided health insurance.
Since you’re no longer penalized if you don’t have a qualifying health plan, you don’t really need Form 1095-B to complete your federal income tax return. But if you receive a 1095-A, you need it to do your taxes.
You’ll use the information on those forms to complete Form 8962, which you use to calculate how much, if any, premium tax credit you’re entitled to. It can also verify you received the right amount of credit. You’ll file Form 8962 with your tax return. If you didn’t receive the correct amount, you may have to pay back some of the credits you received, or you may be entitled to additional funds.
How could this form affect my taxes?
When you apply for insurance on a healthcare exchange, you estimate your family’s income for the tax year. Your estimates are used to determine if you’re entitled to tax credits — called advanced premium credits — to help you buy insurance. But unlike typical tax credits, you usually don’t receive them when you submit your return. Instead, you can choose to have the money paid to your insurer during the year so that you pay lower premiums.
The IRS wants to make sure you got the correct amount of credits, so you need to include Form 8962 with your taxes. Form 8962 asks about your family size, income, how much your premiums were each month and what credits you received each month. Chances are good you won’t know this information offhand, but Form 1095-A (and for some people, 1095-C) has the details you need to complete Form 8962, which you must attach to your 1040 Form.
If the credit amount that you get is more than you’re allowed based on your income and family size, Form 8962 lets the IRS know this — and lets you and the IRS know the amount of excess credits you have to repay. Owing money for excess credits you received would increase your tax bill. On the other hand, if you were owed more credits than you got, your tax bill would be reduced and you could potentially get money back.Learn more about federal tax credits
If you had qualifying health insurance coverage in 2019, you’ll likely receive at least one 1095 tax form. If you need to complete Form 8962, you’ll use your 1095-A or 1095-C (whichever applies to your situation) to do it. Keep your 1095 tax form with your other tax forms and submit Form 8962 to the IRS along with your 1040 tax return.
Rachel Weatherly is a tax product specialist with Credit Karma Tax®. She studied accounting and finance at Western Carolina University and has also worked as a tax analyst. You can find her on LinkedIn.