Tuesday, January 21, 2014

Obamacare

2014 sees the beginning of the Federal penalties for not having health insurance.  People in Massachusetts have been dealing with state penalties for a few years.  Now the state penalty will be replaced by the Federal penalty.
     People who are deemed not to be able to afford health insurance are exempt from the penalty and may receive a tax credit.
     The penalty is not easy to state clearly.
     The basic penalty is $95 per household member or $47.50 for children under 18.  There is a ceiling of $285 per household for this method of calculating the penalty.
     The alternative calculation for the penalty is 1 percent of your income.  The "income" for this calculation is reduced by the basic filing requirement for your filing status ($10,150 for single people, $20,300 for married filing jointly, etc.) plus $3,950 per dependent.  The ceiling for this calculation is the average cost of a "bronze-level" insurance plan, which is the basic entry-level plan.  This amount will vary from state to state.
     The penalty will be the higher of these two calculations.
     Here is a strange thing: If you owe the penalty and it results in you having a balance due on your 2014 return, the IRS is not allowed to go after you for it.  It is not even allowed to charge interest on it.  If in the future you have a refund coming to you, the IRS can deduct your 2014 balance due from it.  That's the worst it can do.
     The penalty (now called a tax by order of the Supreme Court) for not having health insurance will go up quite a bit in 2015 and 2016.  In 2015 it will be 2% of income or $325 per person.  In 2016, it will be 2.5% of income or $695 per person.  After that it will be adjusted for inflation.

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