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ACA Penalties
Q: I know most people are confused, but exactly how much will my penalty be
if I didn’t have the required ACA compliant health insurance policy?
A: The most difficult part of your question is the word ‘exactly’ since the actual amount that any of us would pay is kind of a moving target. Let’s start with the basic idea of how much your penalty could be. There are two calculations and you will be required to pay the HIGHER of these two amounts:
1) $95 per adult, plus $47.50 per child. Maximum amount is $285, or
2) 1% of your total household. Maximum amount is the national average premium cost for a Bronze Plan times the number of people in the family, up to five people. (Bronze plan for an individual for 2014 was $2,448)
A single individual with no children would pay a penalty between $95 and $2,448 depending on their household income. A married couple would pay a penalty between $190 and $4,896 depending on their household income. And a married couple with two minor children would pay a penalty between $285 and $12,240 depending on their household income.
As you can already see, the most difficult part is determining the second of the two calculations which is based on your total household income. The first thing to remember is that taxable income up to the IRS threshold for required tax return filing doesn’t count. If you are below that threshold for your specific filing status, then there will be no penalty. That filing threshold for single taxpayers for 2014 is $10,150. For a married couple filing a joint return, the threshold amount is $20,300.
Your family’s total income for the calculation was generally the adjusted gross income from your 2014 Federal income tax return. This is the amount on line 37 at the very bottom on page one of the return. If you have an excluded income such as tax-free interest income, some social security benefits, and perhaps some foreign income, those amounts must be added back to arrive at your total household income.
If you are single and your adjusted gross income is $35,000, your penalty will be $249. That is $35,000 less the filing threshold amount of $10,150, times one percent. ($35,000 - $10,150 = $24,850 x 1% = $248.50) If your adjusted gross income was $18,000 your penalty would be $95. $18,000 less the filing threshold amount of $10,150 times one percent would be $79 so you would be subject to the minimum amount of $95.
If you are married filing jointly with one child and your adjusted gross income is $70,000 your penalty will be $497. That’s $70,000 less the filing threshold amount of $20,300 times one percent. ($70,000 - $20,300 = $49,700 x 1% = $497) If your adjusted gross income was $40,000 your penalty would be $238. $40,000 less the filing threshold amount of $20,300 times one percent would be $197, which is less than the minimum amount of $95 for you, $95 for your spouse, and $47.50 for your child for a total of $238.
As you probably guessed there are additional complications but there are a number of good websites that can help you calculate the amount of the penalties depending on the size of your family and your family’s total household income. The U.S. Centers for Medicare & Medicaid Services maintains a very good website at HealthCare.gov as does the Tax Policy Center at TaxPolicyCenter.org. You can click straight to their calculators http://taxpolicycenter.org/taxfacts/acacalculator.cfm.
As always, don’t forget that you are not alone. Bookmark our website at NASE.org as well as the HealthCare.gov site and the TaxPolicyCenter.org site and you will always be able to find the help you need.