Today is Tax Day, April 15th. It’s not a day we tend to think about health insurance, but now we will. The Affordable Care Act (ACA or “Obamacare”) states that most Americans with income exceeding the federal poverty line are required by law to have health insurance as of 2014. If you did not sign up for health insurance last year, you may be forced to pay a fine on your 2014 taxes, either through an additional charge or a reduction in your tax return. The tax was not designed to punish people, but rather, to incentivize everyone to get health insurance. It could bring down insurance costs for everyone if there are more healthy people purchasing insurance. However, the government realizes that you may not be able to afford insurance, so you may be able to qualify for a subsidy to pay for health insurance or an exemption to paying the tax because of hardships. Here we break down how much you can expect to pay in tax penalties, available ACA deadline extensions, and the many exemptions you may qualify for.
How Much Are ACA Tax Penalties For Not Having Health Insurance?
How much you are fined will vary depending on a number of factors, including your income, number of dependents, and amount of time you were uninsured. 2014 is the first year tax penalties for uninsured individuals were mandated, therefore fines are starting out lower and will increase annually.
Penalties in place for the 2014 tax year include:
-1% of your total household income or $95 per uninsured adult-whichever is greater; fines may reach up to $285 per family, and $47.50 per uninsured child.
Penalties in place for the 2015 tax year are expected to increase to:
-2% of your total household income, or $325 per uninsured adult–whichever is greater; the fine per uninsured child may reach up to $162.50.
In 2016, this amount is expected to increase once again, and every year thereafter in accordance with the rate of inflation.
The Tax Policy Center has created a quick input survey you can fill out to find out around how much you will have to pay in fines: click here to fill out the quick questionnaire.
Do You Still Owe A Tax Penalty If You Had Health Insurance For Part Or Most Of 2014?
As mentioned earlier, the amount you are fined relates to how long you were uninsured throughout 2014. If you lacked health insurance coverage for two consecutive months or less, this is considered a “short gap” and you will not be fined.
If you were uninsured on and off throughout the year, or have more than one “short gap” on your record, the exemption only applies to the first gap. Every gap in coverage thereafter is eligible to be fined.
ACA Deadline Extension
If you missed the deadline to sign up for health insurance and owe a penalty on your 2014 taxes, the government has granted another ACA deadline extension. The extension period started on March 15 and extends through April 30. This “special enrollment period” is intended to help the estimated 6 million individuals who recently learned of the tax penalty after preparing their taxes.
Health Care Coverage Exemption
According to Healthcare.gov, there are a number of exemptions that may disqualify you from receiving a penalty even if you are uninsured. Each exemption listed below includes a link to the appropriate healthcare.gov page for more information.
-If the cheapest coverage offered through the Marketplace or job-based plan exceeds 8% of your total household income.
-You don’t need to file a tax return because your total income is below the legal limit requiring you to file.
Health Coverage-related Exemptions:
-You were not uninsured for more than two consecutive months.
-Even if you had no insurance coverage in January, February, March and April, as long as you purchased coverage by the date May 1, 2014 you may be safe.
-You qualify for Medicaid but live/lived in a state that did not expand its Medicaid program.
-Your child was not insured earlier in the year, but you enrolled them in the Children’s Health Insurance Program during the 2014 Open Enrollment period
-You were covered for limited services through Medicare or TRICARE.
-You did not accept a job-based plan slated to start in 2013 and end in 2014.
-You had healthcare coverage through AmeriCorps, National Civilian Community Corps (NCCC), or VISTA
Group Membership Exemptions:
-You belong to a federally recognized tribe, or you are eligible for services provided by Indian Health Services.
-You belong to a federally approved health care sharing ministry.
-You belong to a federally recognized group with religious objections to insurance.
-You were serving time in jail or prison.
-You were living abroad, or not “lawfully present”.
-You were homeless in 2014.
-You were evicted or facing foreclosure within the last 6 months.
-Your utility company has sent you a shut-off notice.
-You are a recent victim of domestic violence.
-You recently lost a loved one due to death.
-You experienced a natural or human-cased disaster, including fire, flood, etc.
-You filed for bankruptcy within the last 6 months.
-You have substantial debt due to unaffordable medical expenses incurred within the last 24 months.
-You have been caring for an ill, disabled or aging family member.
-Someone else is required by law to pay for your child’s insurance coverage.
If you faced any of the above hardships, or a different hardship that may have prevented you from obtaining health insurance throughout 2014, click here to locate the appropriate hardship exemption forms you will need to fill out.
Make sure and sign up for health care coverage as soon as possible to prevent paying even higher tax penalties next year!