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Healthcare and Penalties-What you should know

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Will I have to pay a penalty tax if I don’t have qualifying health insurance?

It depends. One of the main objectives of the health-care reform law, the Patient Protection and Affordable Care Act (ACA), is to encourage uninsured individuals to obtain health-care coverage. As a result of the ACA, everyone must have qualifying health insurance coverage, qualify for an exemption, or pay a penalty tax. This requirement is generally referred to as the individual insurance or individual shared responsibility mandate.

Health insurance plans that meet the requirements of the ACA generally include employer-sponsored health plans, government health plans, and health insurance purchased through state-based or federal health insurance exchange marketplaces.

Individuals who are exempt from the individual insurance mandate include:

  • Those who qualify for religious exemptions
  • Certain noncitizens
  • Incarcerated individuals
  • Members of federally recognized American Indian tribes
  • Those who qualify for a hardship exemption

Individuals may also qualify for an exemption if:

  • They are uninsured for less than three months
  • The lowest-priced insurance coverage available to them would cost more than 8% of their income
  • They are not required to file an income tax return because their income is below a specified threshold

For tax year 2014, the penalty tax equals the greater of 1% of the amount of your household income that exceeds a specific amount (generally, the standard deduction plus personal exemption amounts you’re entitled to for the year) or $95 per uninsured adult (half that for uninsured family members under age 18), with a maximum household penalty of $285. In 2015, the percentage rate increases to 2%, the dollar amount per uninsured adult increases to $325, and the maximum household penalty increases to $975.


  
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The information presented here should not be construed as tax advice. Please consult a qualified tax professional regarding your specific situation.