- The Affordable Care Act’s Individual Shared Responsibility Provision
- How to Calculate the Penalty
- What if I can’t afford the penalty?
How to Calculate Penalty for No Health Insurance? The Affordable Care Act’s individual mandate requires that most people have health insurance or pay a tax penalty.
Checkout this video:
The Affordable Care Act’s individual shared responsibility provision requires each person to have health care coverage, qualify for an exemption, or make a payment when filing their federal income tax return. The health care coverage must provide minimum essential coverage. An exemption may be available for certain taxpayers based on their income, religious beliefs, or other factors. If you don’t have coverage or an exemption, you’ll need to make a shared responsibility payment when you file your taxes.
What is the provision?
The individual shared responsibility provision is a key component of the Affordable Care Act that requires everyone to have health insurance coverage,except for those who qualify for a hardship exemption or other special cases.
The requirement to have health insurance applies to everyone who is not covered by a qualifying health plan, such as Medicare, Medicaid, TRICARE, or other public health programs. If you do not have coverage and do not qualify for an exemption, you will be subject to a penalty when you file your taxes.
You will owe 1% of your yearly household income or $95 per person for the year ($47.50 per child under 18), whichever is greater. The maximum penalty per family using this method is $285. You will owe the greater of 2% of your yearly household income or $325 per person for the year ($162.50 per child under 18), with a maximum penalty of $975 per family using this method. The percentage method and flat fee method are capped at the national average premium for a bronze level health plan available through the Marketplace in 2014. The final amount you owe under either method will be rounded to the nearest whole dollar
How does the provision work?
The provision works by charging a fee to people who do not have qualifying health care coverage (also known as minimum essential coverage). The fee is sometimes referred to as the “individual mandate” or the “individual shared responsibility payment.”
The fee is assessed on your federal income tax return. For most people, it is paid when they file their taxes for the year.
If you do not have coverage for part of the year, you may have to pay the fee for each month you are not covered. The fee for not having coverage in 2018 is 2.5% of your yearly income or $695 per adult ($347.50 per child under 18), whichever is greater. The maximum fee per family using this method is $2,085.
You will owe 1/12 of the annual penalty for each month you (or your tax dependents) do not have qualifying health care coverage and are not exempt from the requirement to have coverage.
How to Calculate the Penalty
If you do not have health insurance you may be wondering how to calculate the penalty. The penalty is 2.5% of your income or $695 per adult and $347.50 per child, whichever is higher. You will also have to pay 1/12 of the penalty for each month that you are uninsured.
Step One: Determine the number of months you were uninsured
The number of months you were uninsured will determine how much of a penalty you will have to pay. The penalty is calculated by multiplying the number of months you were uninsured by 1/12 of the annual national average premium for a bronze plan. For example, if the national average premium for a bronze plan is $5,000, the monthly premium would be $416.67. Therefore, if you were uninsured for three months, your penalty would be $1250 ($416.67 x 3).
Step Two: Determine your household income
In order to calculate your penalty, you’ll need to know your household income for the year. This is different from your salary; it’s your total income from all sources, including wages, investments, alimony, child support, and any other source.
If you’re single, your household income is just your own personal income. But if you’re married or have a partner, you’ll need to include their income as well. And if you’re filing taxes jointly, you’ll need to include the incomes of any dependent children as well.
There are a few different ways to calculate your household income. The simplest way is to look at your most recent tax return. Your total household income will be listed on the first page of the return, on the line labeled “Adjusted Gross Income.”
If you don’t have a recent tax return handy, you can also use pay stubs or other financial documents to get an estimate of your household income. Add up all the wages and salaries earned by everyone in your household over the course of a year, then add in any other sources of income, such as investment earnings or alimony payments.
Step Three: Use the Penalty Calculator
The penalty for not having health insurance is calculated one of two ways, depending on your family size and income. The first way to calculate the penalty is as a percent of your total household income. For tax year 2019, the rate is 2.5% of your total household income. The second way to calculate the penalty is per person, and is capped at $695 per adult and $347.50 per child, with a maximum of $2,085 per family regardless of family size or income. You’ll owe whichever amount is greater.
If you have health insurance through your job, you don’t have to pay a penalty even if your coverage doesn’t meet all the requirements under the Affordable Care Act.
What if I can’t afford the penalty?
fines for not having health insurance are calculated based on your household income and how many people in your household are uninsured. If you can’t afford to pay the fine, the good news is that you won’t be sent to jail. Instead, the IRS will work with you to set up a payment plan.
You may be eligible for an exemption
If you don’t have coverage and don’t qualify for an exemption, you’ll have to pay a fee. The fee increases every year. In 2019, the fee is 2.5% of your yearly income or $695 per person ($347.50 per child under 18). You’ll pay whichever is higher. The payment is capped at the national average yearly premium for a bronze plan.
You may be eligible for an exemption from the fee if you meet certain criteria, such as having a hardship that prevent you from getting coverage, belonging to a native American tribe, or being incarcerated.
You may be eligible for a hardship waiver
If you truly cannot afford the penalty, you may be eligible for a hardship waiver. To qualify for a waiver, you must demonstrate that paying the penalty would impose a financial hardship on you or your family.
There are four main criteria that the Marketplace will consider when determining if you qualify for a hardship waiver:
-You experienced homelessness
-You were evicted in the last 6 months or are facing eviction or foreclosure
-You received a shut-off notice from a utility company
-You recently experienced domestic violence
If you think you might qualify for a hardship waiver, contact your state’s Marketplace.