One thing is certain for 2014: With the implementation of the Affordable Care Act (ACA), major changes are underway that affect more than just your healthcare options.
The most significant provision of the ACA requires all Americans to have healthcare. Known as the individual mandate, this portion of the bill imposes a penalty on those without coverage, but allows for certain exemptions. So, how will the ACA affect your taxes?
The Individual Mandate
Starting in 2014, your health insurer must file a report containing information regarding who is covered and the forms of coverage provided.
In 2015, when you file your 2014 tax return, you’ll be asked whether you had health insurance. If the federal government finds you didn’t have healthcare insurance and you didn’t qualify for exemptions, you’ll be issued a penalty. This penalty will be subtracted from your tax refund and starts at $95 per person and $285 for a family of three. The penalty will increase until 2016, when further increases will be reviewed.
How Do I Qualify for Exemptions?
Those exempt from the ACA individual mandate include:
- Illegal immigrants
- Certain religious members
- Native Americans
- Those with income below taxable level
- Those who pay more than 8 percent of their income for healthcare
Others participating in the federal health program may also be exempt. If you already have health insurance, don’t worry about penalties and exemptions, and if you don’t have health insurance, new state exchanges give citizens another avenue for comprehensive coverage at an affordable rate.
Whether you’ve been in support of the ACA or not, it’s here, so it’s not too early or too late to start exploring your healthcare options to avoid a tax penalty.