* You are exempt from penalty if you have a coverage interval that lasts less than three months in a calendar year.
** For most people, it will simply adjust the gross income of your tax return. But if you have a tax-free interest or income earned abroad, you will need to add this amount to your AGI from your 1040 and enter the total amount in the penalty calculator. Be sure to include the income of dependents who must file a tax return.
Although the ACA includes provisions to facilitate the procurement of Medicare – including the expansion of Medicaid, premium subsidies, and coverage of Guaranteed issues – it also includes an individual warrant that requires Americans to purchase health coverage or face a tax penalty.
The individual warrant penalty is a necessary part of a system that provides coverage for pre-existing conditions (there was never a return penalty when insurers were allowed to reject the candidates with pre-existing conditions), the least popular consumer disposition of the ACA. However, most Americans have health insurance and do not have to worry about the penalty for non-insurance.
But what is the penalty of ACA's individual mandate and who should pay it? Despite ACA's gains in reducing the uninsured rate, there are still millions of Americans who do not have coverage, for a variety of reasons. Some are temporarily uninsured, while others face a more permanent lack of insurance. And some are currently insured but may be uninsured in the future.
Do I have to pay?
Use our calculator to see if your family may be subject to a penalty for not having health insurance. But understand that even if you are not insured, there is a good chance that you qualify for an exemption from the penalty. The exemptions are explained in more detail here .
If, for any reason, you decide not to purchase coverage, you can use the calculator on this page to determine the amount of the penalty you would pay. (Find out how our calculator's formula works in the box at the bottom of this page.)
Uninsured taxfilers are more likely to obtain an exemption than a penalty
Although there are still 33 million uninsured people in the United States in 2014, the IRS reported that only 7.9 million reporters were subject to the penalty in 2014 (out of more than 138 million returns). According to the IRS data, 12 million depositors have qualified for an exemption.
The number of tax filers subject to the ACA penalty was lower in 2015 (on the filings that were filed in 2016), since overall Medicare registrations had ] continued to grow . The IRS reported in January 2017 that 6.5 million 2015 tax returns had included individual shared liability payments. But many more people – 12.7 million taxpayers – have applied for an exemption for the 2015 tax year.
A complete list of exemptions (and how to claim them) is available here . One of the exemptions applies to people who experience a single short interval of coverage during the year, the gap being less than three months. This exemption raises many questions, so we have explained in more detail here .
Most Americans Are Not Affected by the Penalty
As noted above, only 6.5 million tax returns for 2015 included the individual ACA mandate penalty. The vast majority of tax filers had health insurance, and even among those who did not, penalty exemptions were more common than criminal assessments.
Most Americans already get health insurance from an employer or government (Medicaid, Medicare, VA); they do not need to worry about the penalty because employer-sponsored and government-sponsored health insurance counts as essential minimum coverage .
If you still have individual market coverage before 2014 and you do not qualify for a premium subsidy for a new plan, you may be able to keep your current plan in 2018: If you have a vested rights plan you can keep it as long as your carrier still allows it to renew and stay in effect. If you have a grandmothered plan that is allowed to renew for 2018 ( in most states carriers still have this option), you can keep your existing coverage. In both cases, you are not subject to the penalty, since grandmother and grandfather schemes are considered to be essential minimum coverage although they do not comply with the # 39; ACA.
Individuals who register for coverage by Department of Health Care Sharing are exempt from the penalty of ACA. Coverage is not as robust or regulated as would be the case for an ACA-compliant plan, and health care sharing departments are not considered a minimum essential coverage. But the sharing of ministries has one of the exemptions of the ACA.
You also have the option of purchasing any of the major medical plans available on the market or off-the-shelf in your area in order to avoid the penalty of $ 25,000. ACA (keep in mind that provides that are not considered major medical coverage are not subject to ACA regulations, and do not count as minimum essential coverage which means that you will be liable to the penalty if you rely on a short-term plan and are not otherwise exempted from the penalty. Things like accident supplements and plans of Prescription discounts may be beneficial, but they do not fulfill the obligation to maintain health insurance).
Although the premium for a new plan is higher than your old non-compliant plan if you are not eligible for premiums (but may be lower if you qualify for grants) , your coverage will probably be more complete thanks to consumer protections of the ACA and essential health benefits . You have until December 15, 2017 to sign up for a plan for 2018 ( The open registration for 2018 is much shorter in most states than in the past, so be prepared for it).
How hard will your sentence be? If you have a fairly high income, the maximum penalty has risen sharply in 2017.
The IRS reported that for taxfilers subject to the penalty in 2014, the average amount of the penalty was about $ 210 . This increased significantly for 2015, when the average penalty was approximately $ 470 . The definitive data for 2016 will not be available until early 2018, but t it IRS published preliminary data stating amounts penalties on the 2016 tax returns filed by March 2, 2017. At that time, 1.8 million taxable returns were filed and the total penalty amount was $ 1.2 billion – average of about $ 667 per depositor who owed a penalty.
Although the average penalties are in the order of hundreds of dollars, the penalty of ACA's individual mandate is a progressive tax: if a family earning $ 500,000 decides not to join the rest of the team, she may have to pay more than $ 16,000 for 2017. But, to be clear, the vast majority of very high income families have health insurance.
Today, the median net family income in the United States is about $ 56,500 (half of American families earn less and half earn more.) For 2017, the penalty for a middle income family of four $ 60,000 would be $ 2,085 (the lump sum penalty would be used because it is greater than the income penalty percentage see details below below, under "How the penalty works" ). This is much less than the penalty that a more affluent family would pay based on a percentage of its income.
The penalty can never exceed the national average cost for a bronze plan, however. The ceilings of penalty are readjusted annually to reflect changes in the average cost of a bronze plan:
The IRS announced in Revenue Procedure 2015-15 that the maximum penalty of 2015 was $ 2,484 for a single person and $ 12,420 for a family of five or more people ( both being slightly higher than the maximum penalties). for 2014 ).
For 2016, Revenue Procedure 2016-43 increased the maximum sentence to $ 2,676 for a single individual and to $ 13,380 for a family of five or more, if they were not included. were not insured in 2016.
For 2017, Revenue Procedure 2017-48 increased the maximum penalty to $ 3,264 for a single person and $ 16,320 for a family of five or more. The significant rate hikes we saw for 2017 ( about 25% ) mean that the average bronze plan is a bit more expensive in 2017 than in 2016. And that means that the maximum penalty is also quite a bit higher.
The Trump Administration has NOT changed the ACA penalty
Millions of Americans have enrolled in ACA-compliant health plans over the last four years, and the uninsured rate is well below what it was in 2013 , before most of the provisions of the ACA come into effect. After reaching its all-time low in 2016, the uninsured rate began to recover in 2017, with 11.7% of the uninsured population in the second quarter of the year, compared to 10.9% the second half of 2016.
And under the Trump administration, there is a widespread belief that the individual mandate is no longer applied, which could be part of what motivates the uninsured rate again (unsubsidized premiums are also significantly higher in 2017 than they were in 2016, which is probably also a factor for people who do not qualify for bonus grants – and the same thing happens for 2018 ).
However, the individual term penalty is still in place, and Tim Jost reports to Health Affairs that it is still in effect .
There are various reasons why nearly 12% of the population is not insured. Some are in the Medicaid coverage gap some are undocumented some are affected by the family's glitch (in all of these cases, exemptions from the individual mandate is available).
But some people simply do not want to buy coverage, or do not agree with the ACA in terms of what they consider to be "affordable". If you are among them, one of your concerns will be whether you will be subject to the tax that is enshrined in the law – and if you are, what penalty you could expect to pay.
In the early days and weeks after Donald Trump won the presidential election, it was expected that Republicans in Congress could finally repeal at least some aspects of ACA ; the penalty of the individual mandate was usually at the top of their list of things to eliminate.
But their efforts have stagnated – for the moment – when Republicans in the Senate failed three different versions of the repeal bill of the ACA that House Republicans had passed in May (the American Health Care Act ). The House bill and the three versions of the Senate would have retroactively eliminated the individual term penalty until early 2016. If this provision had been passed, the individual term penalty would have disappeared by 2017, 39; IRS should have issued refund checks to people who paid the penalty because they were not insured in 2016.
The Congressional Budget Office (CBO) estimated that if the legislation had been enacted, the individual market premiums would have been 15 to 20% higher in 2018 (compared to what it would have been). they would have been in 2018, not compared to what they are in 2017), mainly because of the elimination of the penalty and the impact it would have had on the pool of risks: Healthy people would have been more likely to give up their coverage, while sick people would have retained their coverage.
But that has not happened and, for the time being, the individual mandate remains in place. Although the clock was exhausted in September for a reconciliation bill to repeal the ACA in 2017, Republican lawmakers are trying to pass a tax reform law that would include Repeal of the individual sentence. The future of the penalty is still pending, but in November 2017, nothing has changed about it.
Earlier in 2017, following Trump's decree ordering federal agencies to be as lenient as possible in their application of the ACA, the IRS issued a statement stating that they would continue to accept "silent declarations" for 2016 (ie, tax returns with the question of whether or not the declarant had covered the insurance disease).
This is the same protocol that was followed for the 2014 and 2015 returns, but prior to the Trump Decree, the IRS had planned to reject the 2016 returns that did not occur. not answered the question in one way or another. Their change of course was probably the result of the executive order, but all he did was maintain the status quo that had existed for two years. Nothing else has changed, and all about the enforcement of the sentences is still the same as in previous years (the penalty is higher than it does not) Was the previous years, but the performance is unchanged).
But starting with the 2018 tax reporting season, the IRS stated that they will no longer accept the "silent" statements . For the first time, taxfilers will have to report in their tax return if they have taken out health insurance during the previous year and leave the question blank will no longer be an option.
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Your tax is higher than 1) a fixed amount based on the number of uninsured persons in your household; or 2) a percentage of your income (up to the national average cost of a plan Bronze as determined by the IRS and adjusted annually to reflect changes in premiums ).
This means that the wealthier households will eventually use the second formula and could be affected by the penalty cap. For example: for 2017, a person earning less than $ 37,000 would pay only $ 695 (dollar calculation) while a $ 200,000 earner would pay a penalty equal to the national average cost of a bronze plan ( $ 3,264 for 2017). This is because 2.5% of its income above the tax return threshold would be about $ 4,740, which is higher than the cost national way of a bronze plan.
1) Amount in flat dollars
In 2014, the dollar penalty was $ 95 per adult discovered (it increased to $ 325 in 2015 and $ 695 in 2016) plus half that amount for each uninsured child under 18 years of age. the adult rate, no matter how many children you have. In 2014, it was $ 285 ($ 975 in 2015 and $ 2,085 in 2016). Starting in 2017, the lump sum penalty is subject to an annual adjustment based on inflation. But for 2017, the IRS confirmed that there was no adjustment of inflation, so the lump sum penalty continued to be of $ 695 per adult in 2017, with a maximum of $ 2,085 per family. And for 2018, this will again be the case, since the IRS confirmed that the lump sum penalty will remain unchanged in 2018.
2) Percentage of income
In 2014, the penalty was 1% (it increased to 2% in 2015, 2.5% in 2016 and beyond). The penalty is capped at the average cost of a Bronze Plan, which is $ 3,264 for an individual in 2017 and $ 16,320 for a family of five or more; this cap is adjusted annually to track the average cost of Bronze plans. Rich households will be happy to know that they will only pay a penalty on the portion of their adjusted gross income "above and beyond their deposit threshold ," ] Center for Policy and Budget Priorities & # 39; Judy Solomon.
But if you use the calculator above, you do not have to search for your deposit threshold. Just enter your adjusted gross income and our calculator will do the rest. For most people, it will simply adjust the gross income of your tax return. But if you have non-taxable social security benefits, tax-exempt interest, or income earned abroad and housing costs for Americans living abroad, you will need to add these amounts to your AGI from your 1040 barely calculator. Be sure to include the income of dependents who must file a tax return.