Understanding the health insurance tax penalty
Wait...I can get fined for not buying health insurance?
Unfortunately, yes. When tax season rolls around, you'll pay the fine on your tax return (as if taxes weren't stressful enough!). There are a few different reasons you'd have to pay up:
- You chose to go without health insurance. If you don't buy health insurance this year, the government will fine you either $695 per person ($347.50 per child under 18) or 2.5% of your income, whichever is greater (enroll in health insurance by January 31st to avoid this fine!). If you only had insurance for part of the year, you'll have to pay 1/12th of the penalty for each month you were uninsured.
- Your income estimate was too high. If you do buy health insurance and are awarded a subsidy, be careful. If you make more money than what you originally estimated on your application, you'll have to pay the government back.
A few things to note:
- There is a grace period for going uninsured: if you don't have health insurance for less than three months of the year, you won’t have to pay a fine.
- Paying the penalty does not mean you have health insurance coverage. You will still be responsible for 100% of the costs of your medical care.
But I don't want to pay!
There are a few ways to avoid paying the penalty:
- Buy health insurance. Sounds straightforward, but it's true! The Open Enrollment Period is from November 1st until December 15, 2017. Buying insurance is often less expensive than the penalty itself...TIME reports that about half of people who qualify for a subsidy can find a plan that's less than their fine would be.
- Accurately estimate your income. Reporting the right income amount when applying for a government discount will spare you a headache next April. This guide has a few tips to help you out.
- See if you qualify for an exemption. The government has a whole list of exemptions to the penalty. Here are some common scenarios that make the list:
- You lived in a state that didn’t expand its Medicaid program but you would have qualified if it had
- You received a shut-off notice from a utility company.
- You had medical expenses you couldn’t pay in the last 24 months that resulted in substantial debt
- Your individual insurance plan was cancelled and you believe other Marketplace plans are unaffordable.
To see the full list and the nitty-gritty rules, click here. Have any questions? Make sure to reach out to us -- we're always here to help!