How to Calculate Penalty for No Health Insurance in 2016

The amount you will pay for not having health insurance in 2016 is increasing. Here’s how to calculate the penalty.

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The fee for not having health insurance

The fee for not having health insurance is also called the individual shared responsibility payment. You may owe this fee if you didn’t have health insurance for any month in 2016 and didn’t qualify for an exemption. The fee is calculated two different ways. You’ll owe whichever amount is higher.

How much is the fee?

The fee for not having health insurance in 2016 is 2.5% of your yearly household income or $695 per person, whichever is higher. The price of the fee increases every year.

The fee is paid with your taxes. If you don’t have health insurance for just part of the year, 1/12 of the annual fee is charged for each month you’re uninsured. If you’re uninsured for less than 3 months, you don’t have to pay the fee at all.

You don’t have to pay the fee if any of these apply:

-You would have had to pay more than 8% of your household income for a health insurance plan that covers everyone in your family.
-You qualify for an exemption from the Fee because of a life event or special circumstance, like financial hardship or being homeless.
-You qualify for an exemption from the Fee because you don’t have to file a tax return because your income is below the filing threshold.

How is the fee calculated?

If you don’t have health insurance during 2016, you’ll have to pay a fee. The fee is calculated two different ways. You’ll pay whichever of these amounts is higher.

1% of your yearly household income. (Only the amount of income above the tax filing threshold, about $10,000 for an individual, is used to calculate the fee.) The maximum fee is the national average premium for a bronze plan.

$695 per person for the year ($347.50 per child under 18). The maximum fee per family using this method is $2,085.

Exemptions from the fee

In 2016, the fee for not having health insurance is 2.5% of your yearly household income or $695 per person ($347.50 per child under 18), whichever is higher. If you’re one of the millions of Americans who don’t have health insurance, you may have to pay a fee called the individual mandate penalty. The fee is sometimes called the “Obamacare penalty.” The fine is calculated based on your income and how many people in your household don’t have health insurance.

Who is exempt from the fee?

If you’re wondering if you have to pay the fee for not having health insurance, the answer is that it depends on your situation. You may be exempt from the fee if any of the following apply to you:

-You don’t have to file a federal tax return because your income is too low.
-You’re a member of a federally recognized tribe or eligible for health care services through an Indian Health Services provider.
-You’re a member of a religious sect with religious objections to insurance, including social security and Medicare.
-You’re in a health care sharing ministry.
-You’re in jail or prison.
-You have a financial hardship that makes it difficult for you to pay for coverage. (This includes people who have filed for bankruptcy in the last 6 months or had their utilities shut off.)
-You experienced hardships getting insurance due to domestic violence.
-You’re enrolled in aqualified health plan through the Health Insurance Marketplace , but only for 1 or 2 months during the year because your employment situation changed and you lost access to other job-based coverage outside of Open Enrollment season. (If this happens, you qualify for a “short coverage gap exemption.”)

How do I claim an exemption?

If you’re not required to have health coverage, you can claim an exemption from the fee. You don’t need to do anything to claim an exemption. If you qualify for an exemption, you don’t have to make any payments with your return.

To qualify for certain types of exemptions, you must submit a claim form to the Marketplace. For some types of exemptions, you may be able to get an exemption certificate number (ECN) from the Marketplace that you’ll enter on your tax return.

The following list shows the types of exemptions and whether or not you need an ECN:
-Hardship: No ECN needed. Claim this exemption on your tax return if you experienced financial hardship that prevented you from getting health coverage. -Short coverage gap: No ECN needed. Claim this exemption on your tax return if, during 1 or 2 months of the year, you went without health coverage for no more than 2 consecutive months and a short coverage gap is all that caused you to be uninsured for that part of the year. You don’t qualify if you could have enrolled in a health plan but chose not to.
-Affordability: May need ECN. Claim this exemption on your tax return if the cheapest coverage available would have cost more than 8% of your household income even after any qualifying changes in circumstances occurred during the year (changes in income, job status, family size, or location). You may be able to get an ECN from the Marketplace instead of claiming this exemption on your tax return.-Unavailable plans: May need ECN. Claim this exemption on your tax return if no health plans are available in your area that meet certain requirements, or if only plans that cover only mini-med plans are available -Health sharing ministry membership: May need ECN. Claim this exemption on your tax return if you’re a member of a healthcare sharing ministry Tribal members: May need ECN. Claim this exemption on your tax return if you’re a member of a federally recognized Indian tribe, including Alaska Native Claims Settlement Act Corporation shareholders (ANCSA), or descended from one -Members of religious sects with objections to insurance: May need ECN. Claim this exemption on -Members of recognized religious sects with objections No ECN needed

How to pay the fee

The fee for not having health insurance in 2016 is 2.5% of your yearly household income or $695 per person, whichever is higher. You’ll have to pay whichever of those amounts is greater. For example, let’s say you’re single and your 2016 income is $20,000. 2.5% of that is $500, so you would owe the IRS $695.

When is the fee due?

The fee for not having health insurance is generally due when you file your federal income tax return for the year.

If you don’t have health insurance for part of the year, the fee is 1/12 of the yearly amount for each month you (or your tax dependents) don’t have coverage.

For example, let’s say the yearly fee for a family of four is $2,000 and they didn’t have coverage for six months of 2016. The monthly penalty would be 1/12 of $2,000, or $166.67. The total penalty would be $1,000 ($166.67 x 6 months).

How do I pay the fee?

The fee is paid with your tax return. If you don’t have health insurance, you’ll need to file an additional form with your taxes called the “Individual Shared Responsibility Payment.”

You’ll need to calculate your fee when you file your taxes. The fee is calculated using a percentage of your income or a flat rate, whichever is greater. For 2016, the percentage is 2.5% of your yearly income or $695 per person ($347.50 per child under 18), whichever is greater.

If you’re required to pay the fee, you’ll pay it for each month you or anyone in your family didn’t have health insurance coverage. You’ll make one payment for all months combined when you file your federal tax return for the year.