The ACA or the Affordable Care Act includes a provision that most Americans are required to purchase health insurance. Everyone who was required to purchase insurance and didn’t could owe a tax penalty as a result. This is also commonly referred to as the Obamacare penalty.
Who is responsible for paying the tax penalty
A tax penalty is applicable for individuals who have gone more than three months or 90 days without health insurance. If you have insurance for at least one day in a month it counts as being insured according to the law. Assume that you decided not to purchase health insurance at the beginning of the year, but decided to buy a policy on March 31st. You would not pay a penalty because you were one-day shy of the three- consecutive month mark.
Costs of the penalty
The penalty for not carrying health insurance can be calculated in one of two ways. It is the greater of a flat rate or percentage of your household income. The penalties for 2017 are $695 for an adult and $347.50 for each child or 2.5% of your total adjusted gross income. The maximum penalty one household can owe is $2,085. The amounts for 2018 have yet to be announced but are expected to be higher than those for 2017.
The tax software you decide to use or a tax professional can determine how much of a penalty you will have to pay for not carrying health insurance. The IRS isn’t going to automatically reject tax returns for individuals who don’t confirm whether they have insurance, but the IRS has the right to contact you for follow-up questions if necessary.
Exemptions from being required to pay the penalty
There are exemptions that could change your status you aren’t subjected to the tax penalty under the ACA. You will be exempt from the penalty if you meet any of the following conditions:
• You’re in a health care sharing ministry or pool
• You have a religious reason for not purchasing coverage
• You’ve been living abroad for over a year
• You’ve been incarcerated
• You identify as Native American or are eligible for health services offered by an Indian Health Services provider
• You were uninsured for less than three months during the year
• You don’t make enough money to file a tax return
• The cheapest insurance coverage costs more than 8.13 percent of your overall household income
• You’ve experienced a hardship that qualifies for an exemption such as bankruptcy, job loss, or an eviction. You can claim this when you file your return for the year.
Avoiding a penalty by purchasing insurance
Start with your employer on your search for healthcare. If coverage isn’t offered, start your search at heathcare.gov to find your state’s marketplace or find a plan and prices. Open enrollment which allows anyone to sign up is limited to 45 days from Nov 1st until Dec 15th, 2017. A qualifying life event, such as a marriage or birth, may also allow you to sign up at other times during the year.
Here at Greene County Insurance we offer group insurance coverages. Please contact us today for your free group insurance quote on health insurance.