Are you worried about a penalty for not having health insurance? Thinkin’ you could pay a hefty amount? This article’s here to help! Learn how to calculate it ‘n find out how to avoid it altogether.
Ready for a guide on the U.S.’s special healthcare laws? Let’s go!
You may have to pay the penalty if you didn’t have health insurance in 2018. It depends on your income level and family size.
This guide explains how the penalty is calculated. And it also advises people without health insurance to get coverage. The penalty is usually lower than buying a plan. So, to protect your financial health, it’s a wise idea to get coverage.
Understanding the Health Insurance Penalty
Under the Affordable Care Act, individuals must have health insurance or face a penalty. This is called the individual shared responsibility payment. The amount of the penalty depends on filing status and total household-adjusted gross income.
The maximum penalty is calculated by the greater of two amounts. Either a percentage of household income or a flat dollar amount per person. These amounts adjust annually for inflation.
For 2020, if someone does not have health insurance, the penalty will be either 2.5% of their total household adjusted gross income or $695 for each adult plus $347.50 for other dependents (up to $2,085).
Even if they don’t owe tax, they must pay any applicable penalties. They must report whether anyone in the household did not have health insurance, and submit payment.
Factors That Determine the Penalty Amount
The Affordable Care Act (ACA) needs many U.S. citizens and legal residents to have minimum essential coverage or pay a fee. This fee is assessed when taxes are filed. It depends on various factors.
Income is one of them. When filing taxes, report the total household income. See if any exemptions reduce or remove the fee payment.
Filing status affects the fee calculation. It also affects any credits if buying health insurance in future tax years.
Frequency exceeding the filing threshold may add an extra cost. This is on top of the regular penalties for having individual or shared healthcare coverage during certain months.
Age is a factor in the fee. Those under 26 may get exemptions. These must be applied correctly on federal tax returns.
How to Calculate the Penalty
The Affordable Care Act needs most individuals to have minimum-level health insurance. Those who don’t maintain coverage, face a tax penalty.
To work out the penalty for a given year, take household income and multiply it by a percentage. This is based on how much the income is over the filing threshold. Divide the amount by 12 to get the national average premium.
Then, multiply your result by the higher of 2/12ths of that average premium or $695 per adult (or $347.50 per child). This will give the dollar amount of the penalty if you don’t sign up for an ACA plan and don’t qualify for an exemption.
Exemptions from the Penalty
To avoid a penalty for not having health insurance, some people must prove they are exempt. The Affordable Care Act makes all individuals have insurance unless they fit specific categories. These include: not needing to file taxes, having incomes too low, being part of certain religious sects, being part of a federally-recognized Indian tribe, having hardship cases, or having insurance premiums that exceed 8% of household income.
TaxSlayer can help determine exemptions with questions before filing. To qualify, an exemption form may need to be submitted to the Marketplace. When applying, documentation is required in order to prove identity and eligibility. This will be reviewed case-by-case.
How to Avoid Paying the Penalty?
Individuals without health insurance can reduce the penalty they pay by taking certain steps. These depend on their circumstances.
Document hardship: If unemployment, bankruptcy, foreclosure or eviction are happening, an exemption may be possible.
Purchase short-term policy: If not exempt, a short-term policy is an option, with limited coverage.
Enroll in Medicaid/CHIP: If income is low, enrolling in either of these could avoid a penalty.
Enroll in ACA Marketplace Plans: Before the deadline, enroll in a plan to avoid penalty.
Claim tax credits: Subsidies may be available, lowering monthly premiums and the penalty.
Resources for Further Information
For more info on penalty calculations and exemption possibilities, contact a certified insurance provider. Many have online tools, like tax calculators and penalty estimators, to help understand the cost of not having health insurance.
The Department of Health and Human Services provides a Summary of Benefits and Coverage (SBC) document. It outlines minimum essential coverage requirements and cost-sharing for medical services and treatments.
A lawyer or tax specialist can give advice specific to your finances. They can tell if you qualify for exemptions due to special circumstances, hardship cases, or other programs or assistance from state healthcare services.
So, it’s crucial to know that nearly all US people must have health insurance or pay a punishment for not having it. Unless they fit certain exceptions.
The penalty for not having coverage will depend on family size and income. It can change with the current laws.
The most useful way to bypass the penalty is to get a health plan that matches ACA’s requirements. Or to be exempt from insurance under certain conditions.
Finally, consider your situation and decide if you need coverage to dodge the fee related to being uninsured.