The good news is that it’s easy to get health insurance coverage. We’ve broken downthe different plans to help you understand what’s covered under each. Even having the bare minimum – say, catastrophic coverage for those who qualify – is enough to avoid paying a tax penalty. You also don’t have to buy a plan through the Marketplace to avoid paying the fee; any coverage that qualifies as “minimum essential coverage” is enough.
Why does the law include a penalty if I don’t have health insurance?The penalty is one way of making sure enough consumers are obtaining the required coverage.. As of 2014, the number of uninsured Americans had dropped to a seven-year low of about 10%. More than 16 million people who were uninsured have now gained coverage, but that still leaves millions who may have to pay the penalty.
How much is the penalty?If you did not have coverage in 2015, and didn’t qualify for an exemption, you’ll pay the greater of these two amounts:
- 2% of your yearly household income. Only the amount of income above the tax filing threshold – about $10,300 for an individual – is used to calculate the penalty.
- $325 per adult for the year and $162.50 per child under 18. The maximum penalty per family using this method is $975.
The amount of the penalty goes up in 2016, so make sure you’ve purchased health care by then or obtained a qualifying exemption. The open enrollment period for 2016 began November 1, and coverage can begin as soon as January 1 if you enroll by December 15. Keep in mind that if you’re enrolling in Medicaid or CHIP, you can sign up any time.
What if I only had health insurance for part of 2015?If you spent less than three consecutive months uninsured in 2015, you still can avoid the penalty. But beginning in 2015, the exemption for short gaps in coverage will look back to the end of 2014 to determine if this exemption will apply if there’s a gap in coverage at the beginning of 2015. Any more than that, and you may have to pay unless you qualify for another type of exemption. The penalty is then calculated as 1/12 of the annual penalty for each month you spent uninsured.
What are other exemptions?If you qualify for an exemption, you can avoid a penalty. There are a variety of exemptions, many of which can be claimed on your federal tax return. Some common exemptions from the penalty for not having health coverage include having too little income, religious objections, incarceration or being out of the country. There are also “hardship” exemptions, which can be claimed if tough life situations prevented you from getting health insurance. See our article about the different kinds of exemptions and how to apply for them.
If I have a penalty, how do I pay it?If you owe a penalty, you can use the worksheets located in the instructions to Form 8965, Health Coverage Exemptions, to figure the amount due. The IRS has more information on the process, and Virtual Bookkeepers USA tax professional can also help. 850-725-5696. www.VirtualBookkeepersUSA.com. or visit our Pensacola Florida Income Tax Site now.