• Healthcare Penalties & Exemptions

    There is a Tax Penalty for Not Having Health Insurance Coverage 
    There are lots of myths about the ACA penalty for not having insurance! Many uninsured taxpayers are shocked to learn just how much their penalty when they don't have qualifying health insurance. The penalty was higher than the $95 most people expected last year, but this year (2015) it will be three times that much.  Yes, the penalty is $325 per individual up to $975 for the tax family; OR 2% of household income; whichever is greater.
    Honestly, it’s no surprise that taxpayers are confused. In general, the computation of the penalty would be the lesser of (a) the sum of the monthly penalty amounts or (b) the sum of the monthly national average bronze plan premiums for the family. The sum described in (a) is the greater of (i) the flat dollar amount or (ii) the applicable percentage (e.g., 2% in 20145) of the taxpayer’s household income over the applicable filing threshold. Also, the flat dollar amount for an entire household is limited to 300% of the applicable dollar amount per uninsured adult. Also, the family cannot pay more than the average national premium for a bronze plan in penalties.
    Perfectly clear, right?
    Now there is a much easier way to explain the penalty. To help explain the penalty in a simpler manner, we created this explanation, worksheet, and example. We hope that this helps to clarify the ACA tax penalty for you and clear up misinformation and confusion. Please feel free to use, reproduce, and/or distribute these documents as much as you like; we just ask that you do so without modifying the content or format. Of course, we encourage all users to discuss the results with a trained tax preparer before drawing conclusions.
    Exemptions Can Stop the Penalty
    Another way to stop the penalty is to see if you qualify for an “exemption”.

    If you get an exemption, that generally means the penalty for not having health coverage doesn’t apply to you. Ask your Jackson Hewitt Tax Pro about how we can help you apply for an exemption. The two most common exemption are for, (1) taxpayers who don’t have to file a tax return because their income is too low and, (2) for customers whose income is below 138% and they live in one of the 23 states that did not expand Medicaid. If you meet another exemption such as affordability, special interest groups, or hardship related, you may need to apply for an exemption from the Marketplace instead of on your tax return.


    If you don’t have health insurance, you may qualify for an exemption from the penalty.  There are up to 30 different exemptions from the penalty.  Some of them must be requested from the IRS when you file your tax return, some must be requested through the Marketplace and the number you receive on approval must be reported on the tax return, and some may be applied for through either the IRS or the Marketplace.


    The most common two exemptions are available on the Form 1040:

    • Taxpayers whose income is below the filing requirement for the applicable filing status.
      • Single                                                  $10,300
      • Married Filing Jointly                     $20,600
      • Married Filing Separately              $4,000
      • Head of Household                       $13,250
      • Qualifying Widow(er)                   $16,600
    • Taxpayers whose income is below 138% Federal Poverty Level (FPL) and they live in one of the 23 state that did not expand Medicaid.  These states are: Alabama, Alaska, Florida, Georgia, Idaho, Indiana, Kansas, Louisiana, Maine, Mississippi, Missouri, Montana, Nebraska, North Carolina, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, Wisconsin, and Wyoming.


    If you did not have insurance for all or part of the year and didn’t qualify for either of these exemptions, you may qualify for another exemption.  Contact your Jackson Hewitt Tax Pro for more information or go to healthcare.gov and use the Exemptions Tool to determine which exemptions you qualify for.

    Penalty Graphics:
    Use this worksheet to calculate the annual penalty for your situation.
    Example of a completed ACA Penalty Calculation worksheet.

    Exemption Graphics:
    Special Penalty Exemption for Low-Income Households in Non-Expansion States
    Tax Penalty Exemptions – See if One Applies to You