• Healthcare Penalties & Exemptions


    There is a Tax Penalty for Not Having Health Coverage in 2014
     
    There are lots of myths about the ACA penalty for not having insurance! We continue to discuss the penalty with our tax customers. Many uninsured taxpayers are shocked to learn that their penalty for lacking minimum essential coverage could be a lot more than $95 in 2014. In fact, it could be almost 1% of their entire annual income!
     
    Honestly, it’s no surprise that taxpayers are confused. In general, the computation of the penalty would be the lesser of (a) the sum of the monthly penalty amounts or (b) the sum of the monthly national average bronze plan premiums for the family. The sum described in (a) is the greater of (i) the flat dollar amount or (ii) the applicable percentage (e.g., 1% in 2014) of the taxpayer’s household income over the applicable filing threshold. Also, the flat dollar amount for an entire household is limited to 300% of the applicable dollar amount per uninsured adult. Also, the family cannot pay more than the average national premium for a bronze plan in penalties.
     
    Perfectly clear, right?
     
    Now there is a much easier way to explain the penalty. To help with this educational effort, we created this explanation, worksheet, and example. We hope that this helps to clarify the ACA tax penalty for you and clear up misinformation and confusion. Please feel free to use, reproduce, and/or distribute these documents as much as you like; we just ask that you do so without modifying the content or format. Of course, we encourage all users to discuss the results with a trained tax preparer before drawing conclusions.
     
    Exemptions Can Stop the Penalty
     
    Another way to stop the penalty is to see if you qualify for an “exemption”.
    If you get an exemption, that generally means the penalty for not having health coverage doesn’t apply to you. Ask your Jackson Hewitt Tax Pro about how we can help you apply for an exemption. We also created two exemption graphics that show all the different kinds of exemptions. The first talks about the special exemption from the tax penalty for customers with income that is too low to qualify for ACA help (note: this only applies to taxpayers who live in states that did not expand Medicaid eligibility). Download the explanation of this special exemption specific to these customers who make too little to qualify for Medicaid in certain states here or in the ACA Business Center. The second infographic can be used by all taxpayers, in all states, and for all the different exemption categories. This comprehensive illustration of the exemption process should be a useful tool to help you understand the different options to avoid penalties if you are unable to afford insurance. Please note, though, that most taxpayers will need to apply for exemptions before they do their taxes next year.
     
    Penalty Graphics:
    Use this worksheet to calculate the annual penalty for your situation.
    Example of a completed ACA Penalty Calculation worksheet.
    This explains the tax penalty
     
    Exemption Graphics:
    Special Penalty Exemption for Low-Income Households in Non-Expansion States
    Tax Penalty Exemptions – See if One Applies to You