The Affordable Care Act Taxes and Penalties

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The Affordable Care Act Taxes and Penalties

The ACA is still in place and individuals who failed to obtain required health care coverage in 2018 may still be subject to a penalty that will be calculated on their 2018 federal income tax return. The elimination of the individual mandate is not effective until 2019. The consequence of not being covered in 2018 is a penalty, calculated one of two ways. The higher of the two applies: 

  • 2.5% of yearly household income exceeding the filing threshold, which is $10,150 for an individual. The maximum penalty is the national average monthly premium for a “Bronze” plan.
  • $695 per person ($347.50 per child) for the year. The maximum penalty per family is $2,085.

If an individual obtains qualified insurance at some point during the year but after the required deadline, the penalty is calculated as 1/12 of the year’s annual penalty times the number of months the person was not insured.

If you do not currently have coverage, the open enrollment period through the Marketplace is closed. Insurance can still be obtained through private entities. Some individuals qualify for special enrollment even after the Marketplace is closed if they have a “qualifying life event” like changes to family size.  You may be exempt from the individual responsibility payment if one of the following applies:

  • You were uninsured for less than three months during the year;
  • The lowest priced coverage available to you would cost more than 8.13% of your household income;
  • You don’t have to file a tax return because your income is too low;
  • You are eligible for Indian health services;
  • You are a member of a recognized health care sharing ministry;
  • You are a member of a recognized religious sect with objections to insurance;
  • You are incarcerated; or
  • You are not lawfully present in the US.

There are also hardship exemptions available, including, but not limited to, getting a shut-off notice from a utility, major property damage from a natural disaster, filing for bankruptcy, suffering domestic violence, facing foreclosure or eviction from your residence, and having large unpaid medical bills within the past two years. Individuals seeking a hardship exemption must apply for the exemption through the exchange prior to filing their tax return. Applicants whose exemption is approved will receive a code number to include on their tax return.

If you obtained coverage through the Marketplace you may be eligible for a tax credit if you: 

  • Buy health insurance through the Marketplace;
  • Are ineligible for coverage by an employer or government plan;
  • Are within certain income limits; and
  • Do not file Married Filing Separate, and you are not eligible to be claimed as a dependent by another person.