ObamaCare ACA Tax Penalty in 2015

The Affordable Care Act (ACA) often referred to as ObamaCare is a large reform. Many Americans are now able to receive access to health insurance due to the ACA. However, with the enactment of the ObamaCare laws, there could be potential tax benefits

 

ObamaCare ACA Tax Penalty in 2015

The Affordable Care Act (ACA) requires most Americans to have health insurance starting in 2014. People who don’t comply have to pay a penalty, the amount of which depends on several factors, including income and family size. The Individual Mandate (AKA the Individual Shared Responsibility Provision ) is the part of the Affordable Care Act that says you must obtain and maintain minimum essential coverage throughout the year, get an exemption, or pay a penalty.

 

What is the Health Insurance Penalty (ObamaCare ACA Tax Penalty)

Americans with no health insurance last year in 2014 might very surprised with the IRS penalty. Further, many mistakenly believe that this will on be $95. In fact, the ObamaCare penalty for not having health insurance can quickly get into the thousands of dollars for certain taxpayers who might be caught off guard when they wile their 2014 taxes in 2015. It is essential that taxpayers accurately report their insurance status because the IRS has ways to verify the truthfulness of a tax return that is filed.

 

Avoid Health Insurance Penalty (ObamaCare ACA Tax Penalty)

To avoid the penalty on your tax return,  you must obtain minimum essential coverage and maintain it throughout the year or get an exemption. This requires Americans to get covered during open enrollment 2015 starting November 15th, 2014 and ending February 15th, 2015. It is necessary to make sure you have a health plan with minimal essential coverage. If insurance is unaffordable to you based on your income, you may qualify for an exemption from the fee. Complete an application in the Health Insurance Marketplace to see if your income qualifies you for an exemption.

Health Insurance Plans Sold Outside of the Marketplace

Many plans that are sold outside of the health insurance exchanges do not provide this minimum essential coverage. Therefore, it is imperative that taxpayers purchase a health insurance plan in an exchange that meets these coverage requirements as defined by federal law. You don’t have to get your insurance through the health insurance marketplace. If possible, you can also get coverage through your employer, a private insurer or through Medicaid, if you qualify.

 

How much is the health insurance penalty?

The fee for not having health coverage is calculated one of 2 ways on a tax return. The IRS explains it as this: If you or your dependents don’t have insurance that qualifies as minimum essential coverage you’ll pay either a percentage of your household income or a flat fee– whichever is higher. You’ll pay the fee on the federal income tax return you file for the year you don’t have coverage. Most people will file their 2014 returns in early 2015 and their 2015 returns in early 2016.

 

 

The fee in 2015 for no health insurance

If you don’t have coverage in 2015, you’ll pay the higher of these two amounts:

  • 2% of your yearly household income. (Only the amount of income above the tax filing threshold, about $10,000 for an individual, is used to calculate the penalty.) The maximum penalty is the national average premium for a bronze plan.
  • $325 per person for the year ($162.50 per child under 18). The maximum penalty per family using this method is $975.

 

The fee for not having coverage in 2014

If you didn’t have coverage in 2014, you’ll pay the higher of these two amounts when you file your 2014 federal tax return:

  • 1% of your yearly household income. (Only the amount of income above the tax filing threshold, about $10,000 for an individual, is used to calculate the penalty.) The maximum penalty is the national average premium for a bronze plan.
  • $95 per person for the year ($47.50 per child under 18). The maximum penalty per family using this method is $285.

Example: A  person making $50,000 would be subject to a $400 penalty, while a couple earning that amount would each pay $300.

 

 

The fee after 2015 for having no health insurance

The penalty increases every year. In 2016 it’s 2.5% of income or $695 per person. After that it’s adjusted for inflation.

The penalty amount is also based on the number of months you or your dependents were uninsured.

  1. If you’re uninsured for less than three consecutive months, you won’t have to pay a penalty for that time period. This is called a “short gap.”
  2. If you have more than one short gap in coverage during the year, your penalty exemption only applies to the first gap.

Those who are owed money could see their refunds docked by the penalty amount. The IRS cannot enforce the Individual Shared Responsibility provision with jail time, liens, or any other typical methods of collection.

 

More Details on Calculating ObamaCare Penalty

Calculating the ACA Penalty

In each year, the penalty is capped based on the national average premium for bronze level insurance plans for single individuals and the number of people in the insurance unit.Specifically, the cap equals that average premium times the number of people up to a maximum of five. The average bronze plan premium for 2014 and the projected premiums for 2015 and 2016 are:
2014:        $2,448
2015:        $2,570
2016:        $2,699
For an explanation of how the average bronze plan premium was calculated for 2014, see IRS Internal Revenue Bulletin: 2014-33.