Now that tax year 2016 has started, those without adequate health insurance will face the full weight of the penalty for noncompliance established under the Patient Protection and Affordable Care Act. Known as the individual mandate, this federal fee for not being insured began the phase-in process in 2014 and takes full effect this year.
For taxpayers who lack health insurance, the amount of the penalty is based on factors including income, number of uninsured household members, age, and filing status. Depending on your individual circumstances, your penalty would be calculated either as a flat dollar amount for you and each dependent without coverage or as 2.5% of your household income. Your monthly penalty would then be 1/12 of the higher of those two numbers, with a maximum amount based on the national average cost of bronze-level health coverage.
In 2016, the applicable flat dollar rate per uninsured household member is $695 for each adult and $347.50 for each child under 18. However, the flat dollar amount cannot exceed $2,085, or 300% of the per adult penalty.
Unless you qualify for an exemption, you will be paying more in 2016 for not having health coverage than ever before. While the personal responsibility requirement to have health insurance is not subject to criminal or civil penalties under the tax code, the IRS can seize your refund for failure to pay. For joint filers, both parties are liable for any penalty incurred.
If you have questions about the individual mandate and how it will impact your 2016 taxes, don’t hesitate to contact Taxation Solutions, Inc. for the answers you need. Serving the Mesa area, we’re here to help you deal with the Affordable Care Act and all of its tax ramifications.