Real Talk Series: I Don’t Have Health Insurance, but I Can’t Afford a Penalty

Q. I missed the window to sign up for health insurance in 2016, and I can’t afford to pay the penalty. How will this affect my taxes?

A. If you were unable to get 2016 health insurance and are worried about paying the penalty for not having health insurance, I have some information that may ease your mind when you file your taxes.

First, you may take comfort in knowing that there are more than 30 ways to qualify for an exemption from the penalty for not having health insurance, ranging from income related exemptions to hardships. About 40% of uninsured Americans may qualify for an exemption from the penalty for not having health insurance, so be sure to check out HealthCare.gov or the IRS free online tool to find out if you’re eligible for an exemption. In addition, you may get the exemption right through your tax return with TurboTax. If your income is below the IRS income filing threshold or you can’t afford a Marketplace plan, you do not have to apply for the exemption through the Marketplace.

If you don’t qualify for an exemption, you may be eligible for tax credits on your 2016 taxes like the Child Tax Credit, the Earned Income Tax Credit, or the American Opportunity Tax Credit that may help offset the penalty for not having health insurance.

The penalty for 2017 is 2.5% of your total household adjusted gross income, or $695 per adult ($347.50 per child), whichever is higher (with a maximum of $2,085 adjusted for inflation). For instance, a family of 4 making $70,000 would would pay $2,085. If they got a Bronze insurance plan, it would be about $4,600 a year in premiums, but they would qualify for about $2,650 in subsidy, which means their cost would be $1,950. That’s less than the penalty, plus the benefit of being insured.

You still have time to enroll for health insurance for 2017. Open enrollment ends January 31, 2017. You still may be worried that health insurance is expensive, but when you purchase insurance in the Health Insurance Marketplace, you may be able to get help paying for your monthly premiums via a subsidy also known as the Advanced Premium Tax Credit. The credit is based on your household income and number of people in your family. In many cases, the credit enables you to have health insurance at a lower cost than paying the penalty, so don’t miss out on checking out healthcare.gov or your state Marketplace during open enrollment.

And don’t worry about knowing the health care laws for taxes. TurboTax has you covered and will help you easily report your health care status when you file your taxes.