Will I Have to Pay a Tax Penalty If I, My Spouse (If Filing Jointly), and/or Eligible Dependent(s) Did Not Maintain Minimum Essential Health Coverage?
The individual shared responsibility provision of the Affordable Care Act requires a non-exempt individual (which includes you, your spouse (if married filing jointly) and any eligible dependents) to have minimum essential health coverage or pay a tax penalty called a "Shared Responsibility Payment" when filing their federal income tax return. The penalty is calculated based on an individual's each FULL-month* of failure to maintain qualifying healthcare coverage.
*If the individual has qualifying healthcare coverage for at least one day of a month, that individual is considered to have coverage for that ENTIRE month.
Exempt individuals (including those who have a qualifying hardship) may NOT have to pay the tax penalty OR may be able to pay a reduced penalty. Depending on the type of exemption(s) and/or hardship(s) being claimed, penalty relief may apply for the full-year OR affected months of the year in which the individual did not have qualifying healthcare coverage.
How Much Is The Penalty For Year 2016?
For each FULL month a non-exempt individual fails to maintain minimum essential health coverage in 2016, the applicable penalty is equal to 1/12th of the GREATER of:
$695 for each household member age 18 or older and $347.50 per child (up to a maximum of $2,085 per family) OR
2.5% of household income for the taxable year in excess of the threshold amount for filing a tax return based on filing status
IMPORTANT NOTE: The amount calculated above CANNOT BE GREATER than the cost of the national average premium for a bronze level health plan available through the Marketplace in year 2016. The annual national average premium for a bronze level health plan available through the Marketplace for 2016 is $2,676 per individual ($223 per month per individual) and a maximum of $13,380 for a family with five or more members ($1,115 per month for a family with five or more members).
Click here to view example tax penalty calculations
What Happens If I Cannot Afford To Pay The Tax Penalty for Failure To Maintain Minimum Essential Health Coverage?
Congress gave the Internal Revenue Service (IRS) limited power to collect this tax penalty. The IRS cannot file a lien against you, cannot levy your wages or salary, and cannot freeze any of your financial accounts such as bank accounts. The IRS can however reduce the amount of any tax refund shown on your current and future income tax returns (if any) to pay for the tax penalty which is known as the Shared Responsibility Payment.
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