The Affordable Care Act set a precedent that all United States citizens with a certain income had to have health insurance. Whether it is obtained through employment or purchased privately, there are penalties for those who do not have it. Most people get their insurance through their employer while the rest buy theirs privately but there are recent statistics that show that around 50 million are uninsured. With President Trump’s executive order, here is what you need to know about healthcare insurance and penalties for the 2017 tax season.
Tax Penalties Past and Present
In 2014, the tax penalty for not having insurance was $95 or 1% of income for a single person and $285 or 1% of income for a family with a maximum penalty of $9800. By 2016, that penalty was much higher with $695 or 2.5% of income for a single person and $2,085 or 2.5% of income penalty for a family with a $13,000 maximum penalty. As you can see, the penalty jumped quite a bit and that is the same penalty in 2017 as it was in 2016.
Affordable Care Act Repeal
When Donald Trump took office as the 45th President, he and Congress started the process to appeal the Affordable Care Act. Right now, an alternative to health insurance that millions may lose has not been established and the process could take quite some time.
Tax Penalties for 2017
The process of overhauling the ACA leads some to believe that the mandate will be removed and no penalty for not having health insurance will be in place. However, this is not the case quite yet.
The law is still in effect and while the new administration is discussing not enforcing it, it is not in your best interest to assume that you can either wait on filing your returns just in case the penalty is taken out of the equation or not pay the penalty altogether.
Some are basing their decision off of the executive order that was signed in January that requires federal agencies to waive or exempt health law-related provisions that would impose costs or penalties on individuals, to the extent permitted by law. The problem is you have to qualify for one of the several exemptions.
What could happen if the individual mandate is removed without some kind of alternative in place, then those filing taxes in 2018 may have no penalty at all or a partial penalty. This does not, however, apply to taxes in 2017 so it is recommended to pay the penalty or if you qualify, apply for one of the exemption options.
Healthcare.gov outlines several exemptions:
Income Related Exemptions. There are a couple of exemptions like any healthcare options available are more than 8.13% of your household income or your income is below what is required to file.
Hardship Exemptions – This is a financial hardship that kept you from getting insurance.
Healthcare Coverage Related Exemptions – You were only uninsured for two months or in a state that did not expand the Medicaid program but your incomes is below poverty level by 138%.
Group Membership Exemptions – You have to be a member of either a recognized religious sect with religious objections to insurance, federally recognized tribe, or a member of a recognized health care sharing ministry.
Other Exemptions – These include being incarcerated, a member of your household was adopted or born that year, a citizen living abroad, or someone in the household died during the year.
If you have any questions about healthcare insurance and penalties for the 2017 tax year, please feel free to contact us via email, through our website, or call us at 865-281-1461.