Posted by Carmen Garcia

Things To Know About the ACA (Affordable Care Act) Tax Penalty

Things To Know About the ACA (Affordable Care Act) Tax Penalty

There has been a lot of talk about tax penalties under the Affordable Care Act (ACA) in recent years. You may have heard of this tax penalty known as "individual mandate."

Simply put, you will have to pay this penalty if you can afford health insurance but are not enrolled in a plan. Many people are still puzzled by this requirement, hence the need to answer some of the most basic questions like how much your family should pay and how you can be exempt from the Affordable Care Act tax penalty.


What is the Affordable Care Act (ACA) tax penalty or individual mandate?

One of the Affordable Care Act's most important achievements is the concept of guaranteed issue. This means that no one can refuse medical treatment for a pre-existing condition. According to the Affordable Care Act, everyone has the right to health insurance, regardless of their state of health at the time of registration. Before the Affordable Care Act, this was not always the case, and health insurers refused to cover millions of people.

To offset the cost accumulated by providers who now cover more people with potentially costly health conditions, the penalty is mandatory to ensure a healthy customer base is buying insurance. Essentially, health insurance companies can only pay sick people if healthy people also pay for the insurance.


How much do I owe if I don't have health insurance?

The penalty for no health insurance is calculated on the basis of a full year and is applied according to the number of months that you and your family have been without coverage. You will then pay the premiums in addition to the federal income tax return for that year. If you do not pay the contributions, the full amount will be withheld from the next federal income tax return.

There are two ways to calculate the rate. You will either pay a portion of your family's income or per person who is not covered. You pay the higher fine.

The tax penalty will continue to increase as more and more people apply for coverage. Regardless of your state of health, it makes good medical and financial sense to purchase health insurance; the sooner, the better.


How can I be exempt from the Affordable Care Act tax penalty?

The ACA provides a number of individual mandate exemptions for those who cannot afford health insurance or find themselves in circumstances where they are not covered.

The basic exemptions for the individual mandate are as follows:

  • Coverage gap: If you go less than three consecutive months without coverage, you will be exempt from the penalty during those months. If you have more than one coverage gap of less than three consecutive months in the same year, you will be exempt from the first gap in coverage.

  • Hardship: The Affordable Care Act considers a number of hardships that can relieve a person from being fined. If you think you are eligible for this exemption, a tax expert can help you confirm and request for it.

  • Low Income/No Filing Requirements: If you owe no federal income tax below the IRS deposit limit, you are exempt from the fine.

  • Medicaid Extension and Denial: If you have applied for Medicaid and you were denied or if your condition has not expanded Medicaid under the Affordable Care Act, you are exempt.

  • Unattainable coverage options: If healthcare costs are more than 8% of your family income, you may be exempt.

Many of these exemptions require an application. A tax professional like CARMEN GARCIA will be able to help you review the full list and help you apply for any exemptions you may be eligible for.


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Carmen Garcia
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