Health Care Reform Tax Penalty
For 2014, if a taxpayer does not have qualifying coverage for himself/herself and any dependents, and does not qualify for an exemption, the taxpayer will be required to make an Individual Shared Responsibility payment (sometimes referred to as a penalty). This is due with the filing of the annual income tax return. The 2014 payment is the greater of:
- 1% of household income above the tax return-filing threshold (rising to 2% in 2015 and 2.5% in later years), or
- A flat dollar amount, which is $95 per adult and $47.50 per child for any month without coverage or exemption, limited to a monthly maximum of $285,
The maximum payment cannot exceed the cost of the national average premium for the Marketplace’s Bronze-level health plan in 2014.
Health Care Reform Premium Tax Credit
A taxpayer or non-dependent child may be eligible for the Premium Tax Credit – which can lower out-of-pocket premiums – if they:
- Purchase insurance through the Marketplace,
- Are ineligible for employer or government-plan coverage,
- Are within specific low- or moderate-income limits (individuals with income below $45,960 and families of four more with income below $94,200), and
- Cannot be claimed as a dependent by another person.
- Filing a federal income tax return is also a requirement for the tax credit.
For more information about how Health Care Reform will impact your tax plan, contact a tax professional.
The final post in this series will focus on Minnesota specific tax changes.