How to Avoid Paying a Penalty
The best way to avoid paying the penalty is to purchase health insurance. If you have a qualified health plan for the year, then you are exempt from any tax penalty. If you choose not to purchase health insurance, you will need to file for an exemption to avoid paying a penalty.
Why do you have to Pay a Penalty?
The tax penalty is in place to encourage those who are healthy to purchase health insurance. If only unhealthy individuals participated in the health insurance marketplace it would drive health costs up for everyone. The aim of Obamacare is to create a pool of both healthy and unhealthy individuals, to help insurance companies offset medical costs, and making health coverage more accessible and affordable to everyone.
Find out whether you may be among the millions of Americans who will have to pay penalties for not having health insurance.
How Your Fee Is Calculated
The penalty you may have to pay will be either:
- Percentage of household income
- Per person
You will be responsible for whichever is higher.
Percentage Of Income
Flat 2.5% of your household income with the maximum being the average price of the Bronze plan sold through the health insurance marketplace for the year you are filing for.
Each adult in your household will be responsible for $695. For every child under the age of 18, you pay an additional $347.50. The maximum one household would have to pay is $2,085.
How do I pay my fee?
Since the fee is considered a tax penalty, you pay it when you file your federal taxes.
I’m unemployed, am I exempt?
If you are unemployed, you may qualify for a tax exemption based on your income. If health insurance is a financial burden, may even qualify for Medicaid.
What is the short gap exemption?
You can qualify for a short gap exemption if you went with out coverage for 1 or 2 consecutive months. If you qualify, you will be exempt from paying any penalty for not having coverage.
What if I don’t pay?
While there are no criminal penalties for failure to pay, the IRS will take the amount you owe out of your future tax refunds.
What if I had coverage for part of the year?
If you have coverage for part of the year you will only be paying a penalty for the months you did not have coverage. To calculate this, take you can divide what your total annual penalty is, pay 1/12 of the cost for each month you were without coverage.
What counts as qualifying health coverage?
Any health insurance plan that meets the 10 essential benefits counts as qualifying health coverage. If you have a health insurance plan that is missing any of the 10 essential benefits, you may still have to pay a penalty.