The individual responsibility clause of the Affordable Care Act (ACA), also known as the individual mandate, requires all Americans to have health insurance by January 1, 2014, or pay a penalty tax.
How will the Penalty Tax be Collected?
The penalty tax will be collected by the Internal Revenue Service (IRS). When you file your taxes, if you have a gap in health coverage for a continuous three-months or more during the previous year, the IRS will take the penalty. The penalty amount will be prorated for the number of months of no coverage.
How will the Penalty Tax be Calculated?
In 2014: $95 per adult and $47.50 per child (up to $285 per family) OR 1.0% of family income, whichever is greater.
In 2015: $325 per adult and $162.50 per child (up to $975 per family) OR 2.0% of family income, whichever is greater.
In 2016 and beyond: $695 per adult and $347.50 per child (up to $2085 per family) OR 2.5% of family income, whichever is greater. After 2016, penalty amounts will be increased annually by the cost of living.
Is There Any Way to Avoid the Penalty Tax?
The best way to avoid the penalty tax is to purchase health insurance by January 1, 2014! There are a few exceptions:
- You are part of a religion opposed to acceptance of benefits from a health insurance policy.
- You are an undocumented immigrant.
- You are incarcerated.
- You are a member of certain Native American tribes.
- Your family income is below the threshold requiring you to file a tax return ($9,350 for an individual in 2010; $18,700 for a family in 2010).
- You have to pay more than 8% of your income for health insurance, after taking into account any employer contributions or tax credits.
- You have a gap in coverage for less than a continuous three-month period (this exemption may only be used for one period without coverage in a year).
The right health care coverage, at the right price, is out there for everyone, and we can help you find it! Don’t pay a tax penalty!
Make sure you and everyone in your family is covered under an ACA-compliant health plan by January 1, 2014! Open enrollment for health coverage starts on October 1, 2013.
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