How ObamaCare Taxes Affect You: New Taxes, Hikes, Breaks, Credits, and Other Changes
The new tax related provisions in the Affordable Care Act (ObamaCare) include tax hikes, limits to deductions, tax credits, tax breaks, and other changes. While a few of the changes directly affect the average American, tax increases primarily affect high earners (those making over $200,000 as an individual or $250,000 as a family), large businesses (those making over $250,000), and the health care industry, while tax credits primarily affect low-to-middle income Americans and small businesses.
• For the majority of the 85% of Americans with health insurance the percentage of income paid in taxes won’t change much, if at all. However, some of the changes may directly or indirectly affect specific groups.
• The majority of the 15% of Americans without health insurance will primarily be affected by the Individual Mandate (the requirement to buy health insurance), the Employer Mandate (the requirement for large employers to insure full-time employees), and Tax Credits (tax credits reduce premium costs for individuals, families, and small businesses).
The fee you pay if you don’t have health coverage
The fee for not having health coverage is calculated one of 2 ways. If you or your dependents don’t have insurance that qualifies as minimum essential coverage you’ll pay either a percentage of your household income or a flat fee — whichever is higher.
The fee in 2015
If you don’t have coverage in 2015, you’ll pay the higher of these two amounts:
- 2% 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 penalty.) The maximum penalty is the national average premium for a bronze plan.
- $325 per person for the year ($162.50 per child under 18). The maximum penalty per family using this method is $975.
The fee for not having coverage in 2014
If you didn’t have coverage in 2014, you’ll pay the higher of these two amounts when you file your 2014 federal tax return:
- 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 penalty.) The maximum penalty is the national average premium for a bronze plan.
- $95 per person for the year ($47.50 per child under 18). The maximum penalty per family using this method is $285.
The following video explains the Individual Mandate TAX penalty:
The fee after 2015
The penalty increases every year. In 2016 it’s 2.5% of income or $695 per person. After that it’s adjusted for inflation.
How you pay the fee
You’ll pay the fee on the federal income tax return you file for the year you don’t have coverage. Most people will file their 2014 returns in early 2015 and their 2015 returns in early 2016.
Learn more about the individual shared responsibility payment from the Internal Revenue Service.
- What happens if I don’t pay the fee? The IRS will hold back the amount of the fee from any future tax refunds. There are no liens, levies, or criminal penalties for failing to pay the fee.
- If I’m unemployed, do I have to pay the fee? It depends on your household income. If insurance is unaffordable to you based on your income, you may qualify for an exemption from the fee. Complete an application in the Health Insurance Marketplace to see if your income qualifies you for an exemption.
- How is the penalty collected? You’ll pay the penalty when you file the federal income tax return for the year for which you’re seeking coverage. Most people fill out their 2014 tax returns early in 2015 and their 2015 tax returns early in 2016.
- What if I’m uncovered for just part of the year? If you’re uninsured for just part of the year, 1/12 of the yearly penalty applies to each month you’re uninsured. If you’re uninsured for less than 3 months of the year, you don’t have to make a payment.
- Are the rules the same in each state? Yes. The rules about paying penalties are the same whether the Marketplace is run by your state or the federal government.
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