ACA Individual Tax Penalty Explained


Penalty myths abound! We continue to discuss the individual mandate in the Affordable Care Act (ACA) – and the associated tax 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. Indeed, that fact runs counter to the most common perceptions about the ACA’s penalty provision.


And who can fault taxpayers for a poor understanding of the penalty? 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. 78 Fed. Reg. 53646, 53662-63 (Aug. 30, 2013) (to be codified at 26 CFR § 1.5000A-4). 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. The final rule on the individual mandate and associated tax penalties clarifies that the flat dollar amount for an entire household is limited to 300% of the applicable dollar amount per uninsured adult. Id. (to be codified at 26 CFR § 1.5000A-4(b)(2)(i)(B)). Also, the family cannot pay more than the average national premium for a bronze plan in penalties. Id. (to be codified at 26 CFR § 1.5000A-4(a)(2)).


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 help to clarify the ACA tax penalty for taxpayer 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.


Use this worksheet to calculate the annual penalty for your situation.


Example of a completed ACA Penalty Calculation worksheet.


The ACA is tightly linked to taxes – and we at Jackson Hewitt are focused on helping American families with this and all aspects of the tax code. Please feel free to contact me at or 615-761-6929 if I can be helpful in any way.






Brian Haile

Senior Vice President for Health Policy

Jackson Hewitt Tax Service Inc.

Cell: (615) 761-6929


Twitter: @haile_brian