How to Calculate Penalty for No Health Insurance?

If you can afford health insurance but choose not to buy it, you may have to pay a fee called the individual shared responsibility payment. (The fee is sometimes called the “health insurance mandate,” “individual mandate,” or “Obamacare penalty.”)

For tax year 2019 (filing your taxes in 2020), the fee is 2.5% of your yearly household income or $695 per person for the year ($347.50 per child under 18), whichever is higher. The maximum fee is capped at the cost of a national average premium for a bronze level health plan available through the Marketplace.

You’ll owed the fee on your taxes if any of these apply:
-You don’t have coverage and don’t qualify for an exemption
-You have coverage only part of the year
-You have an exemption for only part of the year

What is the Affordable Care Act?

The Affordable Care Act (ACA) is a health care reform law that was passed by the Obama administration in 2010. The ACA includes a number of provisions that aim to make health care more affordable and accessible for Americans. One of the key provisions of the ACA is the individual mandate, which requires all Americans to have health insurance coverage or face a penalty. The penalty for not having health insurance is calculated based on your income and is applied when you file your taxes. For 2018, the penalty is 2.5% of your income or $695 per adult and $347.50 per child, whichever is greater.

The Individual Shared Responsibility Provision

The individual shared responsibility provision is a key component of the Affordable Care Act that requires individuals to have health insurance coverage or pay a penalty. The provision is also sometimes referred to as the individual mandate.

Under the provision, individuals who do not have qualifying health insurance coverage must pay a penalty when they file their taxes. The penalty for not having health insurance is often called the individual shared responsibility payment.

The amount of the payment depends on your income and family size. For example, for tax year 2018, the payment would be 2% of your income if you are single and do not have any children, or 4% of your income if you are married and do not have any children.

If you have children, the payment would be 4% of your income for each child you have. The maximum payment would be 6% of your income regardless of how many children you have.

The amount of the payment also increases each year. For example, for tax year 2019, the payment would be 2.5% of your income if you are single and do not have any children, or 5% of your income if you are married and do not have any children.

If you have children, the payment would be 5% of your income for each child you have. The maximum payment would be 10% of your income regardless of how many children you have.

How to Calculate the Penalty

The penalty for not having health insurance is calculated as a percentage of your taxable income or as a flat fee, whichever amount is greater. For the 2016 tax year, the penalty is 2.5% of your taxable income or $695 per adult ($347.50 per child under 18), whichever amount is greater.

The penalty increases every year. For 2017, it’s 2.5% of taxable income or $695 per adult ($347.50 per child under 18), whichever amount is greater.

You’ll pay the higher of these two amounts:
2.5% of your yearly household income. (Only the part of your household income that’s above the tax filing threshold, about $10,000 for an individual, will be used to calculate the penalty.) The maximum percentage is capped at the national average premium for a bronze plan sold through the health insurance marketplace in your state.
$325 per person for the year ($162.50 per child under 18). The maximum fee per family using this method is $975.

Exemptions from the Penalty

If you’re wondering how to calculate penalty for no health insurance, you’ll need to know about the different exemptions from the penalty. Depending on your income, family size, and other factors, you may be exempt from the penalty. The most common exemption is for people with very low incomes. Other exemptions include people who are members of certain religious groups and people who are incarcerated.

How to Pay the Penalty

The fee for not having insurance in 2019 is 2.5% of your yearly household income or $695 per adult and $347.50 per child, whichever is greater. You’ll have to pay whichever amount is greater. The fee is assessed every year that you or anyone in your family doesn’t have health insurance and doesn’t qualify for an exemption.

You’ll pay the fee when you file your federal taxes for the year that you didn’t have coverage. For example, if you didn’t have insurance in 2019, you’ll pay the fee when you file your 2019 taxes in 2020. If you don’t have health insurance for part of the year, you may be able to get an exemption from the fee for certain months.

The Penalty for Not Maintaining Minimum Essential Coverage

The Affordable Care Act (ACA) requires all U.S. citizens and legal residents to have health insurance that meets certain minimum standards, known as minimum essential coverage (MEC). Those who don’t maintain MEC throughout the year are subject to a penalty, unless they qualify for an exemption from the ACA’s individual mandate.

The penalty for not maintaining MEC is calculated one of two ways, depending on your filing status and household income: as a percentage of your household income, or per person ($2,085 in 2018). The method that results in the larger penalty is the one that’s used. For example, if you’re single with an income of $50,000 in 2018, 3% of your income would come to $1,500—so that’s the amount of your penalty. But if you have three family members who are also uninsured and don’t qualify for an exemption, the per-person penalty would be $6,255 ($2,085 x 3 people), so that would be the amount of your penalty.

Your penalty will be assessed when you file your federal income tax return for the year during which you didn’t have insurance coverage (or qualify for an exemption). The fee increases every year. For 2018 coverage (which is reported on your 2017 federal tax return), the fee is 2.5% of your yearly household income or $695 per person ($347.50 per child under 18), whichever is greater.

Future Developments

The ACA’s individual mandate required most Americans to have health insurance or pay a tax penalty. The mandate was effective from 2014 to 2018. In 2019, the mandate was repealed, and the tax penalty was eliminated.

However, some states have implemented their own individual mandates. If you live in one of these states, you may be required to have health insurance or pay a tax penalty.

The federal government is still developing its plans for health care reform. It’s possible that a new law will be enacted that includes an individual mandate or some other form of penalty for not having health insurance. Until this happens, there is no federal penalty for not having health insurance.

Conclusion

Based on the information above, if you do not have health insurance coverage in 2019, you will owe a penalty of 2.5% of your yearly household income or $695 per adult and $347.50 per child under 18. The average family would owe a penalty of $2,085.

Resources

There are a few resources that can help you calculate the penalty for not having health insurance. The first is the IRS website, which has a calculator that can help you estimate your penalty. The second is Healthcare.gov, which also has a calculator that can help you estimate your penalty. Finally, you can speak to a tax professional or an insurance agent to get more specific information about your potential penalty.

How to Calculate Penalty for No Health Insurance?