You may already know that starting in 2014 most Americans are required to have health insurance under the Affordable Care Act, but did you know that individuals who do not have health insurance could face a tax penalty in 2015?
If you already have insurance through your employer, Medicaid, Medicare, or a private provider, you are already covered and will not receive a penalty.
If you don’t currently have insurance, there’s a window for enrollment – the government has given families and individuals from October 1, 2013 to March 31, 2014 to purchase health care plans through their state or federal Health Insurance Marketplace.
For those who do not plan on purchasing insurance before the March 31, 2014 deadline, the federal government has identified more than 30 ways to qualify for an exemption, including hardship cases. The IRS has a free online tool to determine if you’re eligible for an exemption. A complete list of exemptions is available at Healthcare.gov.
Be aware that for 2014, the annual one-time tax penalty will be $95 per adult, or one percent of your total income, based on your income. For uninsured children in your family, the penalty is $47.50 per child, with a family maximum of $285 for the year.
Because coverage is assessed on a monthly basis or prorated, you will only owe a portion of the total penalty for the months that you are uninsured. The health care reform tax penalty will be imposed on your 2014 tax return filed in 2015.
The annual penalty will increase each year. For 2015, the annual penalty will increase to $325 per adult and $162.50 per child, with a maximum penalty of $975 per family (or roughly two percent of total income depending on family income). In 2016, the annual penalty will be $695 per adult and $347.50 per child, with a max of $2,085 per family, or about two and a half percent of total income depending on family income.
There are some individuals who will not be required to purchase health insurance and therefore will not be penalized, including people with income below the IRS requirements for filing taxes, those who qualify for religious exemptions and members of Indian tribes.
More questions about the health care reform? Get your answers in the TurboTax community.