As part of the Affordable Care Act, all taxpayers are required to have Individual insurance starting on January 1, 2014. There is a small grace period, but those who haven’t signed up by Valentine’s Day may face a fine when they file their 2014 taxes. All family members included on a taxpayer’s return are considered part of the household for the penalty purpose and they must each have health insurance that meets the minimum essential coverage requirements all during the year.
In order to ensure that all taxpayers are complying with the new laws, a penalty will be assessed on qualified individuals who do not have health insurance. Let’s look at who is subject to the penalty and how it is computed.
Individuals covered under most government sponsored health programs including Medicare Part A, Medicaid, CHIP, Tricare and Veterans health care, as well as employer-provided health coverage, are considered to have minimum essential coverage and are not subject to the penalty. Alternatively, if you do not have health insurance coverage, you are likely at risk of a tax penalty in the future.
So what is the penalty? Starting in 2014 will range from a minimum of $95 to 1% of the household income. By 2016, penalty amounts will range from a minimum of $695 to 2.5% of the household income. The penalty is treated like a tax when you file your tax return and could lower your refund or increase any amount due.
For additional information visit our Affordable Care Act Resource Center.