While many people have health insurance whether through an employer, Medicaid, Medicare or private insurance, there are still hundreds of thousands that may need to shop for their coverage for 2016. If you fall in that camp, not to worry: you still have time to enroll in a 2016 plan through the Health Insurance Marketplace by January 31. But hurry! This year those who do not sign up for a plan before the deadline will not qualify for a special enrollment period unless they have a qualifying life event during the year and may face tax penalties.
How Much is the Tax Penalty?
The health care reform tax penalty is calculated as a percentage of your household income or a flat rate per person. You will have to pay whichever percentage is higher.
The tax penalty is also referred to as an “individual responsibility payment.” For 2015, the annual one-time tax penalty is $325 per adult, or 2 percent of your total income, depending on your income. If you do not purchase health insurance for this 2016, that penalty will increase to $695 per adult or 2.5% of your annual household income.
For uninsured children in your family, the penalty is $347.50 per child. The tax penalty will be assessed on your 2016 taxes when filed in 2017.
The federal government has identified more than 30 ways to qualify for an exemption, including hardship cases. The IRS has a free online tool to determine if you’re eligible for an exemption. A complete list of exemptions is available at Healthcare.gov.
How Do I Know if I Qualify for the Special Enrollment Period?
If you experience a qualifying life event, such as getting married or having a child, you may be eligible for a special enrollment period in which you can purchase health insurance for the Marketplace and most employer plans within 60 days of that life event.
How Do I Know if I Qualify for an Exemption?
About 40% of uninsured Americans may qualify for an exemption from the tax penalty, so be sure to use the IRS free online tool to find out if you’re eligible for an exemption.
Whether or not you have purchased health insurance during Marketplace open enrollment or you are eligible to purchase in the special enrollment period, you may qualify for a subsidy to help you pay for health insurance. The TurboTax subsidy calculator will evaluate if you might qualify for a tax credit from the government, and estimate how much before you go shopping.
As with all tax laws, TurboTax has you covered and is up-to-date with the latest tax law changes. If you have more questions about the Affordable Care Act and how it impacts you and your taxes, you can get answers from TurboTax Health.