How to Calculate Penalty for No Health Insurance in 2016

The penalty for not having health insurance in 2016 is more expensive than ever before. Find out how to calculate the penalty and how to avoid it.

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Introduction

The Affordable Care Act (ACA) requires that most people have health insurance or pay a penalty. The penalty is also sometimes called the “individual shared responsibility payment.” For 2016, the maximum penalty is 2.5% of your yearly household income or $695 per adult and $347.50 per child, whichever is greater.

Here’s how to calculate your penalty if you didn’t have health insurance in 2016:

1. Start with your household income. This is your Modified Adjusted Gross Income (MAGI) plus any tax-exempt interest income you have.
2. Apply the percentage from the table below to figure your penalty.
3. Add together any penalties for each person in your family who didn’t have coverage and didn’t qualify for an exemption. Don’t include any dependents who had coverage all year or who qualified for an exemption from the penalty.
4. Compare your total penalty amount to the national average premium for a Bronze level health plan available through the Marketplace in 2016. If it’s less, you’ll pay the smaller amount; if it’s more, you’ll pay the bigger amount.”

What is the penalty for not having health insurance in 2016?

The fee for not having health insurance averages about $969 per household in 2016. The fee is also called the “shared responsibility payment” and is based on 2.5% of your yearly household income or $695 per person ($347.50 per child under 18), whichever is greater.

You’ll pay the fee on your 2016 federal income tax return that you file in 2017. The fee increases every year. In 2015, it was 2% of income or $325 per person ($162.50 per child under 18). In 2016, it’s 2.5% of income or $695 per person ($347.50 per child under 18). And in 2017, it’s scheduled to go up to 2.8% of income or $750 per person ($375 per child under 18).

How is the penalty calculated?

The penalty is calculated 2% of your yearly income or $325 per person for the year, whichever is more. For children under 18 the penalty is $162.50. The maximum penalty per family using this method is $975.

Who is exempt from the penalty?

If you are exempt from the penalty, you don’t have to pay it. This can happen for a few reasons:

-If you have coverage for part of the year, you may not have to pay the penalty for the months you were uncovered.

How can I avoid the penalty?

The best way to avoid the penalty is to have health insurance that meets the criteria set forth by the Affordable Care Act (ACA). If you do not have ACA-compliant health insurance, you may be subject to a tax penalty. The amount of the penalty is based on a percentage of your taxable income, and it increases each year. For 2016, the penalty is 2.5% of your taxable income or $695 per adult ($347.50 per child under 18), whichever is greater.

There are a few circumstances under which you may be exempt from the penalty, such as if you cannot afford coverage, if you have a gap in coverage for less than three months, or if you qualify for certain hardship exceptions. You can also claim an exemption if you are a member of a religious sect that opposed insurance on religious grounds or if you are an undocumented immigrant.

If you need help calculating your potential penalty, there are a number of online tools available, such as this one from eHealthInsurance.

What if I only have partial coverage?

If you only have partial coverage for the year, you’ll have to pay the greater of two amounts:
1) 2.5% of your household income, or
2) The amount of money that would have been paid for the 60 days following the date that coverage would have started, multiplied by the number of months you were uncovered.

What if I can’t afford health insurance?

If you can’t afford health insurance, you may have to pay a fee. This is sometimes called the “individual shared responsibility payment.”

The fee is sometimes called a “penalty,” “fine,” or an “Individual Shared Responsibility Payment (ISRP).”

We’ll use the term “fee” here.

You may have to pay the fee for any month you (or your dependents) don’t have coverage and don’t qualify for an exemption.

What if I’m only temporarily uninsured?

If you go without health insurance for less than 3 months in a row, you don’t have to pay the fee. This includes any time when you’re not insured for more than 2 consecutive months due to a life event that caused a break in coverage. If you go without health insurance for more than 3 months in a row, you’ll have to pay the fee for each month that you’re uninsured. This applies even if you had coverage for part of the year.

What if I have a gap in coverage?

If you have a gap in health coverage that lasts less than three months, you don’t have to pay the penalty. You qualify for this exemption if, during the gap, you had other qualifying health coverage or qualified for an exemption from the health coverage requirement.

If your gap in coverage lasted longer than three months, you’ll have to pay a penalty for each month you were uninsured. The amount of the penalty is prorated for partial years that you were uninsured.

How do I pay the penalty?

The fee for not having health insurance in 2016 is 2.5% of your yearly household income or $695 per person for the year, whichever is higher. If you’re uninsured for only part of the year, 1/12 of the yearly penalty applies to each month you’re uninsured. The maximum penalty per family using this method is capped at 300% of the per-person fee.

You’ll pay the fee when you file your federal income tax return for the year you didn’t have coverage. For example, if you didn’t have health insurance in 2016, you’ll pay the fee when you file your 2016 federal income tax return in 2017.

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