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The ObamaCare penalties for failing to purchase qualified health insurance start in tax year 2014. If a person was required to purchase minimum essential coverage and did not, she/he would only be required to pay a tax penalty for not purchasing PPACA coverage (if she/he files a U.S. tax return). In many cases, this tax is far less than the premiums that a person would pay for obtaining PPACA/ObamaCare coverage.

Q: What will my penalty tax be if am required to purchase qualified ObamaCare coverage, but do not purchase it?

Penalty Tax Calculations:

Tax penalties begin in 2014 and rise in years following. In each year, the tax consists of the higher of a dollar amount or a percentage of household income. For a given household, the tax applies to each individual, up to a maximum of three.

Following is the schedule of ACA penalty taxes:

  • 2014: The higher of $95 per person (up to 3 people, or $285) OR 1.0% of taxable income.
  • 2015: The higher of $325 per person (up to 3 people, or $975) OR 2.0% of taxable income.
  • 2016: The higher of $695 per person (up to 3 people, or $2,085) OR 2.5% of taxable income.
  • After 2016: The same as 2016, but adjusted annually for cost-of-living increases.

 Tax Penalty Examples:

  • 2014- Family of 2 with a taxable income of $26,000. Penalty Tax is $260;  because $260 ($26,000x 1%) is more than $190 ($95 x 2 persons).
  • 2014 -Family of 3; with a taxable income of $26,000.  Penalty Tax is $285;  because $285 ($95×3 persons) is more than $260 ($26,000 x 1%).
  • 2014 -Family of 3; with a taxable income of $50,000.  Penalty Tax is $500;  because $500 ($50,000 x 1%) is more than $285 ($95 x 3 persons).
  • 2015 -Family of 3; taxable income of $26,000.  Penalty Tax is $975;  because $975 ($325  x 3) is more than $525 ($26,000 x 2%)
  • 2016 -Family of 3; taxable income of $26,000.  Penalty Tax is $2,085;  because $2,085 ($695 x 3) is more than $650 ($26,000 x 2.5%)
  • After 2016: The same as 2016, but adjusted annually for cost-of-living increases.

For those buying health coverage on the government run exchange make sure to check the provider network limits.  Network limitations may cause additional financial penalties.   For example if a person needs health services while traveling out of their network area there are costly out of network penalties.  If coverage is available at all.

Many insurance companies still offer policies off the Exchange.  The premiums are about same with lower deductibles and more robust networks.  However, buying on the government’s exchange is the only way to get the subsidy.  Many people don’t qualify for the subsidy or it’s greatly reduced due to income.  

 

 

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6 Responses to ObamaCare Tax Penalty Rates 2014 – 2016

  1. Chuck Rang on February 25, 2014 at 2:08 pm

    Regarding your post about the tax penalty for people who do not purchase qualifying health insurance, I really wish you had pointed out that not only is there a penalty, but that the individual will lack insurance and be responsible for what could be significant medical bills. Even an annual checkup today is a relatively costly procedure.

    • Jon Bell on February 26, 2014 at 4:44 am

      What significant medical bills are you talking about. Rarely will anyone under age 35 have significant medical bills. An annual check up is expensive. But who in their right mind between the ages of about 6 or 7, and age 45 gets an UNNEEDED ANNUAL CHECK UP??

  2. Jon Bell on February 26, 2014 at 4:38 am

    The Obamacare individual mandate is anathema to everything our forefathers fought for in the Revolutionary War. Taxing any citizen for failure to buy a product is ridiculous. If We The People let the govt get away with this, where will it end? The US Supreme Court got it wrong !! The mandate should have been ruled unconstitutional. Since it wasn’t, here is HOW YOU AVOID PENALTY for not having health insurance.

    If you read the ACA(Obamacare) section regarding individual mandate penalty, you will learn that if you do not pay fine, only way IRS can collect the fine is by deducting the fine amount from your tax REFUND. So all you need to do is make sure you are not going to receive a refund. That can be done by telling your employer, or HR dept. to increase your withholding exemptions by a number large enough to guarantee that you have not pre-paid enough tax to cover your regular Fed Tax liability. Then when you file your return, you pay the amount of “income tax” still due, BUT DO NOT PAY THE PENALTY for not having health insurance. The IRS then has no source for collecting the fine. You see the ACA expressly PROHIBITS IRS FROM INPOSING LIENs, LEVYs, or filing a complaint against you in court for the purpose of collecting Obamacare PENALTY. The ONLY WAY IRS can collect is if you are owed a tax refund.

    To Chuck Rang; As someone who sold health insurance for 35 years, I can assure you those citizens under age 35,unless married and planning to have children, DO NOT NEED HEALTH INSURANCE!! Better off putting money in a tax free Roth IRA or Medical Savings account. There chances of a catastrophic injury or disease is almost nil.

    • Avatar of Tim Barton
      Tim Barton on February 27, 2014 at 9:44 am

      Jon Bell wrote:

      As someone who sold health insurance for 35 years, I can assure you those citizens under age 35,unless married and planning to have children, DO NOT NEED HEALTH INSURANCE!! Better off putting money in a tax free Roth IRA or Medical Savings account. There chances of a catastrophic injury or disease is almost nil.

      Forgive me for being honestly blunt your statement is false. If you gave your clients this advice you are very lucky not to have been sued.
      Those under 35 have their share of expensive illnesses and because they are generally more physically active they are more prone to accidental injuries. The bill for a broken limb could easily exceed $50,000. What happens if the medical event happens before enough funds are saved in the Roth?
      By law Medical Savings Accounts cannot be utilized without a high deductible insurance policy in force.

  3. Frances on March 5, 2014 at 12:56 am

    I refuse to fall into this none sense. I will make sure not tot to get a refund and will not get a health insurance that cost very high and ridiculous deductibles. Obama disappointed me very much.

  4. Ken on March 5, 2014 at 4:59 pm

    There’s also a cap on the penalties — but it would only apply to high income folks. It’s the cost for the cheapest bronze level plan available in the area for that family. Not many would run into this — but if you make quite a bit and don’t have insurance it may limit your penalty (to a high number!).

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