The 2015 tax year has come and gone, and now is the time to prepare for 2016 taxes. One area that every taxpayers needs to address is making sure they have health insurance. This year, the penalties are set to increase significantly if you do not have a qualifying health plan.
Under the Affordable Care Act of 2010 (a.k.a. Obamacare), the federal government mandated a“shared responsibility payment” if you fail to carry health insurance coverage. The idea is that as taxpayers, we all share the burden of paying the bill when someone without insurance needs medical care. To compensate, everyone who does not have health insurance (or a qualifying exemption) must pay a penalty to the IRS.
For 2016, the penalties are as follows:
$695 per adult and $387.50 per child up to a maximum of $2085 per family, or … 2.5% of your household income (above the tax filing threshold)
up to the maximum of the average annual premium nationally for a bronze plan on the federal health insurance exchange.
Do I Qualify for an Exemption?
There are several circumstances in which you can be exempted from paying the shared responsibility payment for 2016.
They include:
- Being a member of a federally recognized Native American tribe
- Having an income that falls below the federal tax return filing threshold
- Being incarcerated for a majority of the tax year
- Being a U.S. citizen living abroad
- Living in a state that did not participate in Medicare expansion as part of the ACA
- Having access to an employer-sponsored plan, but it exceeds 8% of your annual income.
How do I Get Covered?
The open enrollment period to purchase health insurance from a federal or state exchange ended on January 31, 2016. This means in most cases, you cannot
purchase a plan from the exchange until next fall for the 2017 tax year. If you missed the deadline, there are some other ways to obtain qualifying coverage, including:
- Purchasing a plan through your employer;
- Purchasing a private plan through an insurance broker;
- Purchasing a private plan directly from an insurer;
- Applying for Medicaid coverage through your state (must meet low income thresholds to qualify);
- Purchasing an alternative qualifying plan, such as Medi-Share or another healthcare sharing plan.
With every passing year, it is becoming increasingly expensive to go without health insurance (as mandated by the ACA).
To learn more about this and other important tax planning issues for 2016, speak with your local accounting firm.
