Don’t forget, 2014 marks the year when a health tax penalty will be assessed for individuals who fail to purchase health insurance under the new Affordable Care Act (ACA) requirements. Under ACA, every U.S. resident that above the poverty line or who is eligible for Medicaid, will have to purchase a health insurance plan.
The health tax penalty for not purchasing health insurance, whenever an individual’s income allows them to, will start as low as $95 per individual or 1 percent of annual income, enacted as the individual mandate.
The Supreme Court upheld the individual mandate as a tax, and therefore the IRS is responsible for collecting it. By the year 2016, the health tax penalty for not purchasing health insurance hits $695 a year or 2.5 percent of annual income, whichever number is higher. Beyond that time frame, the IRS will collect monies based on cost-of-living adjustments.
The Congressional Budget Office (CBO) estimates that by 2016, approximately 6 million people (2 percent of the U.S. population) will be subject to health tax penalties related to the ACA individual mandate. Penalties will only be applied to those who can afford getting insurance but opt not to. Those who cannot afford the health insurance, won’t be penalized.
More than 30 million elderly residents will be uninsured at that time but likely not subject to the health tax penalty because of low income or hardships.
Others who will be exempt from the health tax penalty, according to Health Reform Source from the Henry J. Kaiser Family Foundation, include:
- undocumented immigrants
- people of certain religious beliefs
- members of Native American tribes
- individuals with an income below $9,350
- families with a collective income below $18,700
- anyone who must pay more than 8 percent of annual income toward insurance after employer contributions
The health insurance requirement is considered satisfied (hence, no penalty will be applied) if an individual is on Medicare, Medicaid, TRICARE, a veteran’s health program, an employer-offered plan, personal insurance purchased at a minimum of Bronze level, or a grandfathered health plan created prior to the ACA.
The health tax penalty coming in 2014 has been modified for families, with a family cap placed on the tax at $2,085 regardless of how many people are in that family group. Children under the age of 18 who are not insured will only be taxed half the amount required for adults, and according to the law, the tax penalty can never exceed the cost of insurance premiums at the lowest level.
Failure to pay the individual mandate penalty will not result in instant jail time; however, the IRS can place liens against possessions and initiate court proceedings if the monies go unpaid.