Most individual taxpayers must signup for health insurance or face a penalty. The penalties vary by taxpayer and there are actually instances in which a health care subsidy may be available. Find out how you will be impacted by the new requirement slated to go into effect January 1st, 2014.
The health insurance requirement
Most Americans need to obtain health care coverage or face a tax penalty. Each state has setup exchanges for consumers to purchase health insurance at healthcare.gov. Open enrollment for these health care exchanges begins on October 1st, 2013 and closes on March 31st, 2014. Please kind in mind though that online enrollment will not be available by October 1st, only in-person, paper or telephone applications will be accepted at that time. Government officials have indicated that you should be able to enroll online in November. Those that already have health insurance through their employer or government sponsored plan, do not need to worry about applying for insurance through the exchanges in 2013.
Will I pay a penalty for the 2014 tax year?
Unfortunately, there’s isn’t a one size fits all answer to this question. However, if you’re uninsured for three or more months during the 2014 tax year, you will be subject to a tax penalty of the greater of 1% of your adjusted gross household income or $95 per adult. It’s important to note that the penalties aren’t levied until the 2014 tax due date or April 15th, 2015. However, you need to start planning now as the 2014 tax year is only a few months away. In addition, you will be reporting your health insurance coverage on your tax returns now. The penalties are also slated to increase over time. By 2015, it will cost you the greater of $325 per adult or 2% of your adjusted gross household income. By 2016, the penalty increases to the greater of 2.5% of your adjusted gross household income or $695 per adult. It’s important to note though that the the total penalty for the taxable year cannot exceed the national average of annual premiums of a bronze-level health insurance plan offered through the exchanges.
Will I qualify for the health care subsidy?
It’s possible, even if you aren’t poor. It’s estimated that about 25 million Americans will qualify for the subsidy. Specifically, you need to earn less than 400% of the federal poverty level or $45,960 for singles and $94,200 for a family of four. The way the formula works is that as you earn more, you will receive less of a federal subsidy. However, the subsidy can easily translate into the several thousand dollar range. It’s important to note that you need to shop the exchanges to receive the subsidy.
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