I Was Not Insured Under the Affordable Care Act: What Tax Penalty Will I Face?

The new health law requires most uninsured individuals to pay a penalty at tax time. But the exact amount can vary from hundreds to thousands of dollars, depending on your income and family size. Here are six factors to keep in mind if you’re facing a tax penalty.

How much is the tax penalty?

The penalty is a flat fee of $95 per adult and $47.50 per child (capped at $285 per family) or 1 percent of your taxable 2014 household income – whichever amount is greater.

For those who owe a percentage of their income, the penalty is capped at the national average premium for a bronze level plan – that’s $2,448 per individual and $12,240 for a family of five or more a year in 2014. The penalty applies even if just one family member was uninsured.

What if I had coverage during part of the year?

The penalty is prorated if you had health coverage for at least part of the year. You won’t be penalized for a coverage gap of less than three consecutive months. But if you have more than one coverage gap during the year, the exemption only applies to the first gap.

How do I pay the tax penalty?

The amount of the tax penalty may be deducted from your IRS refund (if you’re getting one) or be added to the balance you owe the federal government.

What if I can’t afford to pay the tax penalty?

The IRS will hold back the amount of the penalty from any future tax refunds. The IRS, however, can’t use criminal penalties, liens or levies to collect the fine.

Is it too late to buy coverage for 2015 and avoid a similar penalty next year?

You may qualify for a special enrollment period from March 15 to April 30 for uninsured people who learn about the penalty for the first time during tax season. But you must attest that you learned about the penalty after the regular enrollment period ended and paid the 2014 non-coverage fine. The offer applies to people in the 37 states that use HealthCare.gov and some state-run Marketplaces. Check our TurboTax interactive map for information about your state. Remember that the penalty for 2015 non-coverage goes up to $325 per individual or 2% of your taxable household income.

How can I apply for an exemption from the penalty?

There are about 30 non-coverage exemptions. Some can be claimed on your tax form. Others must be granted by the Health Insurance Marketplace, which issues an exemption certificate number (ECN). For a list of exemptions, visit HealthCare.gov or try the IRS free online tool to see if you qualify.

Still need to file your taxes?  Don’t worry,  TurboTax makes it easy to report your health insurance status and calculates the correct amounts and Affordable Care Act forms at no charge.  You also may not end up owing even if you have a tax penalty since you may be eligible for other tax credits and tax deductions to offset the penalty.  TurboTax searches for over 350 tax deductions and credits and gives you the ones you’re eligible for.

If you have more more questions about the Affordable Care Act,  TurboTax has you covered.  You can get your questions answered at TurboTax Health.