Affordable Care Act Penalty and How to Avoid It
With the introduction of the Affordable Health Care Act came a slew of new rules, regulations, laws and penalties that the American people need to know about in order to understand exactly what the ACA is and what it means to all of us. The most important aspect of the Affordable Care Act that everyone needs to understand is the penalties that can be incurred if you don’t sign up for health care by March 31.
There has been a misguided understanding of the new health care penalties and many people believe that it is an across the board penalty, or tax, that we must face. Although there is a basic penalty for not signing up by March 31st, it isn’t exactly the same for every person and every situation.
The standard penalty is $95 and that goes for those of us who are unmarried, have no dependents and with an annual income of less than $19,500. As your income increases, so will the penalty you will face. To be exact, it will increase 1% of the amount by which your income exceeds the sum of a single person’s personal exemption and standard deduction in the federal income tax. This is calculated using your adjusted gross income and any tax-exempt interest and excluded income you earned while abroad.
Another misconception is that if you are married, you will owe the minimum $95 for yourself, your spouse and each dependent over the age of 17 plus half of that amount for every child under 18 living in your home and this total cannot exceed $285. The truth is, it can, and often will, exceed that amount. Read carefully; if 1% of you and your spouse are annual income is more than $285 that is the total you will owe. Now, that total is after your personal exemptions and standard deductions, but it could still add up to a lot of money.
Is There a Cap?
There is a cap; your penalty cannot exceed the exact value of a national average premium for a bronze-level health policy for your family’s size. These totals are not yet clear and could be on the rise as early as next year.
Who Won’t Have To Pay the Tax?
You won’t have to pay the penalty if you:
– Have religious objections to health insurance
– Are an American Indian
– Are in jail
– Are not lawfully present in the US.
– Would suffer economic hardship by purchasing insurance
What If You Don’t Pay?
If you choose not to pay the penalty, the IRS cannot garnish your wages or put you in jail; the only thing they can do is to deduct the amount from your income tax refund.
Understanding the Affordable Care Act and its penalties will ensure that you keep more of your money where it belongs, you pocket
