Don’t Skip Paying Tax Penalty Now, Even If You Expect Obamacare To Be Repealed
By: Mary Thompson, Capstone Brokerage President, March 8, 2017
As long as the individual mandate — which requires most people to have health coverage or face a tax penalty — is the law of the land, you should pay the fine for not having coverage in 2016 unless you qualify for an exemption.
Some tax advisers are advising people either not to pay the penalty or to delay filing because they anticipate changes in the law. That is definitely a bad idea. The requirement that people have health insurance or an exemption from the mandate is still in effect today which means when preparing your taxes you should be sure to abide by the law, or face consequences of not being compliant.
Some experts say changing the rules now could create even more confusion, since some people have already filed their returns. Those taxpayers might have to file amended returns, an extra expense if they use a tax advisers.
If you can afford health insurance but choose not to buy it, you must pay a fee called the individual shared responsibility payment. (The fee is sometimes called the “penalty,” “fine,” or “individual mandate.”)
• You owe the fee for any month you, your spouse, or your tax dependents don’t have qualifying health coverage (sometimes called “minimum essential coverage”).
• You pay the fee when you file your federal tax return for the year you don’t have coverage.
• In some cases, you may qualify for a health coverage exemption from the requirement to have insurance. If you qualify, you won’t have to pay the fee..
Examples of qualifying health coverage
If you’re covered by any of the following types of plans, you’re considered covered under the health care law and don’t have to pay a penalty.
• Any health plan bought through the Health Insurance Marketplace
• Individual health plans bought outside the Health Insurance Marketplace, if they meet the standards for qualified health plans
• Any “grandfathered” individual insurance plan you’ve had since March 23, 2010 or earlier
• Any job-based plan, including retiree plans and COBRA coverage
• Medicare Part A or Part C (but Part B coverage by itself doesn’t qualify)
• Most Medicaid coverage, except for limited coverage plans
• The Children’s Health Insurance Program (CHIP)
• Coverage under a parent’s plan
• Most student health plans (check with your school to see if the plan counts as qualifying health coverage)
• Health coverage for Peace Corps volunteers
• Certain types of veterans health coverage through the Department of Veterans Affairs
• Most TRICARE plans
Calculating the payment for not having medical insurance
2016 & 2017 Fees:
If an individual did not have coverage in 2016 or does not have coverage in 2017, he or she will pay the higher of the following two amounts:
2.5% of the individual’s yearly household income above his or her applicable filing threshold (the amount of gross income that triggers the requirement to file a federal income tax return). The maximum penalty is the national average yearly premium for a bronze plan.
According to IRS guidance, the monthly national average premium for bronze plans offered through Health Insurance Exchanges in 2016 is $223 per individual and $1,115 for a family with five or more members.
$695 per person for the year ($347.50 per child under 18). The maximum penalty per family using this method is $2,085.
Note: If an individual is uninsured for just part of the year, 1/12 of the yearly penalty applies to each month the individual is uninsured. (If an individual is uninsured for less than 3 months, the individual does not have to make a payment.)
For more information it is advised to check in with your insurance broker. A knowledgeable agent would be able to access your personal situation and help guide individuals based on their unique needs.
