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Affordable Care Act Tax Penalty: 2014, 2015, and Beyond

By Dean ‘Mac’ Nichols, Attorney

Doctor | Layman & Nichols LawDid you have health insurance in 2014?

Beginning January 1, 2014 the Individual Mandate of the Affordable Care Act (ACA) was put into effect. The Individual Mandate requires you to maintain government approved coverage throughout the year. If you chose not to obtain qualifying health insurance or if you do not qualify for an exemption you will pay a tax penalty for each month you and any dependents did not have coverage when you file your federal income tax return. The penalty for 2014 is $95 per adult and $47.50 per child with a $285 limit per household, or one percent of any income over $10,000, whichever is greater. In 2014 a single adult with an income of $60,000 will owe a $498.50 penalty, while a married couple filing jointly with an income of $250,000 will owe a penalty of $2,297. You must indicate on IRS Form 1040, 1040A, or 1040EZ if you had coverage and pay the penalty as part of your tax bill unless you qualify for an exemption.

ACA Exemptions

If you chose not to obtain health insurance or if you meet certain requirements, you may qualify for an exemption from paying the tax penalty. There are several exemptions you can apply for. Here are just a few:

Unaffordable Coverage Options – This exemption is available to those who will have to pay more than 8 percent of their annual income for the lowest priced Marketplace Insurance plan available to them.
Low Income/No Filing Requirement – If you earn less than the annual income required to report on a Federal Tax Return you are exempt from the Individual Mandate.
Hardship Exemption – Certain life circumstances may exempt you from the requirement to obtain health insurance. Some of these include: if you are homeless, your home is under foreclosure, you have been evicted in the last six months, you are a victim of domestic violence, a close relative has passed away, you filed for bankruptcy, you have medical bills you are unable to pay, or your insurance plan was cancelled. You can apply for an exemption at However, if you wait too long, your Federal Tax Return could be delayed.
Short Coverage Gap Exemption – You do not have health insurance for less than three consecutive months.
Religious Conscience – You are a member of a recognized religious organization who objects to insurance.

Use IRS Form 8965 Health Coverage Exemptions and file with your 2014 return.

How much will the 2015 tax penalty increase?

The penalty for 2015 is $325 per adult and $162.50 per child with a $975 limit per household or 2% of family income over $10,000, whichever is greater.

Avoid the 2015 tax penalty

Obtain qualifying health insurance by February 15, 2015, the end of the open enrollment period or apply for the qualifying exemptions.

2016 tax penalty

The penalty will rise again.


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