you're opting out of the health-care coverage required by the
Affordable Care Act, make sure you understand how much you'll owe Uncle
Sam as a result.
a family of five, the penalty could be as high as $12,240 for the 2014
tax year, experts say. And for many people, the penalty will rise
sharply in 2015 and 2016.
massive health-care changes passed in 2010 are phasing in, and this is
the first year most Americans must have approved health insurance. Those
who don't will owe a penalty under the Individual Shared Responsibility
Provision. It's due with your income taxes, payable by April 15, 2015.
most people will probably obtain qualified health coverage through an
employer or an exchange, there will be others who owe the penalty. Eddie
Adkins, a health-care and benefits specialist at Grant Thornton in
Washington, says this group will likely include affluent and wealthy
people who want to self-insure or use a so-called nonconforming policy
that doesn't meet Affordable Care Act standards.
there are the "young invincibles": healthy young adults, typically in
their late 20s or early 30s, who will get little or no tax credit to
reduce their premiums. Many would rather spend the cost of health
coverage, which can run from several hundred to several thousand dollars
a year, on something else, such as paying off college loans.
For those who are thinking of opting out, here's what you need to know.
begin with, the penalty is either a flat amount or 1% of your household
income, whichever is greater. For 2014, the flat amount is $95 per
adult and half that for children under 18, with a cap of $285 per
flat penalty rises steeply in the future, to $325 per adult in 2015 and
$695 in 2016, plus half that per child, up to a maximum of $975 in 2015
and $2,085 in 2016.
percentage-of-income penalty rises quickly as well—to 2% of income in
2015 and 2.5% in 2016. As with the flat penalty, there is also a cap on
the maximum payment. It rises no higher than the average cost for a
family of five under a bronze-level Affordable Care Act-approved plan.
taxpayers without proper health coverage will owe the tax penalty in
April, the IRS will have a hard time identifying them. It will get
easier in 2016, when insurers and employers will be required to send the
IRS computer files of participants that can be matched against
individual returns for tax year 2015.
then, the IRS won't be able to use standard collection procedures. For
example, the agency can't put a lien on a taxpayer's house because of an
unpaid health-care penalty. However, interest will be owed on any
unpaid penalties, and the total can be withheld from future tax refunds.