Obama Care’s individual mandate requires that most Americans obtained health insurance by 2014 or pay a tax penalty (the Obama Care Penalty for 2014). The individual mandate went into effect January 1st, 2014 and continues each year. The penalty for not having coverage will be paid on your Federal Income Tax Returns for each full month you or a family member doesn’t have health insurance or an exemption.
Depending on your coverage, income, and family size you will either pay a flat dollar amount, or a percentage of income above the tax return filing threshold for your filing status. The penalty increases every year. The fee is technically called an Individual Shared Responsibility Payment and is part of the Affordable Care Act’s Shared Responsibility Provision.
The fee for not having coverage in 2014
If you didn’t have coverage in 2014, you’ll pay the higher of these two amounts when you file your 2014 federal tax return:
- 1% of your yearly household income. Only the amount of income above the tax filing threshold (about $10,000 for an individual and $20,000 for a couple) is used to calculate the penalty. The maximum penalty is the national average premium for a bronze plan.
- $95 per person for the year ($47.50 per child under 18). The maximum penalty per family using this method is $285.
How Do You Report the Obama Care Penalty?
You’ll pay the fee on the federal income tax return you file for the year you don’t have coverage. You will get a 1095-A, 1095-B, or 1095-C form from your insurer about what months you had coverage. This will help you to figure out if you owe money for any months that you went without coverage. If you had an exemption for any months you may need an exemption certificate number (ECN) provided by the Health Insurance Marketplace.
How to Avoid Obama Care Penalty Fee in 2015
To avoid the penalty you must obtain minimum essential coverage during open enrollment (for 2015 the enrollment period ends February 15th) and maintain it throughout the year, or get an exemption. The fee is owed for each full month you go without coverage or an exemption. Even if you only have coverage for one day of a calendar month, you won’t owe the fee for that month. Due to a short coverage gap you can have up to three consecutive months in a row without coverage each year (although it was 4 months in 2014 if you went without coverage from January to April, due to a hardship exemption for folks who had trouble signing up for the marketplace).
If you miss the deadline for open enrollment, you’ll have to wait until the marketplace opens again to get covered, unless you qualify for a special enrollment period. If you are not required to file taxes, don’t have affordable health insurance options, or meet a number of other criteria you may be exempt from the fee.