2017 TAX PENALTY FOR NO HEALTH INSURANCE
So we’ve talked about what to expect on the carrot side (tax credit).
What about the stick??
That’s the tax penalty for not having health insurance.
It goes up each year and 2017 is no different.
Let’s look at the new levels and how it’s tipping the scale for many people.
We’ll also look at the number #1 mistake people are making regarding the penalty.
Result: $1000’s at tax filing time in 2018!
Let’s get started.
2017 Covered Ca Tax Penalty Introduction
Here’s the deal…
If you do not purchase ACA compliant health insurance for the majority of 2017, you’ll likely have a tax penalty due April of 2018.
The amounts increase each year but here’s the current estimate:
The penalty is starting to really matter.
Let’s look at an example:
If you may $40K and did not have ACA coverage, your expected penalty is now $1000!
That’s a big hit.
If coverage was $250/month, that’s 4 months of coverage paid for!
As your income goes up, so does the tax penalty.
There’s a minimum penalty for people regardless of income.
That’s the $695/adult or half that amount for kids.
So that’s the bad news. Let’s look at some of the details about the penalty and then hopefully, a dose of good news!
Small Print On The 2017 Covered Ca Tax Penalty
Of course, there’s all kinds of rules. It’s Congress after all!
“ACA” Compliant coverage
First, what do they mean by ACA compliant health plans?
The ACA law (Obamacare) established certain guidelines for what a compliant plan must look like.
First, it has to cover the 10 Essential Health benefits. Secondly, it has to conform to certain benefit levels.
These are commonly known as the Metallic plans: Bronze, Silver, Gold, and Platinum.
There’s even a Minimum coverage plan for people under age 30.
So what does all this mean?
Any of the Covered California plans and off-exchange plans that you quote here will qualify!
Just look for the Bronze, Silver, Gold, and Platinum names.
The network (HMO, PPO, HSA, etc) doesn’t matter.
Each carrier’s option will conform.
What doesn’t conform to ACA compliant?
This is a big deal. Many people are in for a surprise April of 2018.
Short term health insurance plans are not ACA compliant.
There are companies that sell non-compliant association plans on the market.
They’re usually very aggressive and about half the price of ACA compliant plans.
One note…they might have many other faults such as daily hospital caps and just an inability (or desire) to pay for claims.
We hear the horror stories daily.
If the pricing sounds too good and the “agent” is pushy, RUN…don’t walk.
Again, all the plans you can find at calhealth.net (except for Short term) are ACA complaint.
Again, short term and questionable association plans are likely not ACA compliant. Be careful!
What If I Months Without Insurance During 2017?
The law allows for one 2-3 month window uncovered without incurring the penalty.
You’ll need to request a hardship waiver from www.healthcare.gov
There are other reasons people may file full year hardship waivers which you can find more information here.
The most common waiver is affordability.
Keep in mind that if your income is under the minimum amounts here, you may qualify for low or no cost Medi-cal anyway!
That’s a slam dunk versus paying the penalty!
This bring up another point…
Combining The Tax Credit And The Tax Penalty For 2017
What if you add the tax penalty AND the lost tax credit??
Look at the levels above.
If you think you might qualify for a 2017 tax credit based on income and size of household (everyone that files together on one 1040 tax form)…
Call us at 800-320-6269 right away. Our services are free as certified Covered Ca agents.
The actual premium may come way down from the the baseline rate due to the tax credit.
Let’s say you make $25K annually.
Your tax penalty would be over $600!
More importantly, depending on your age, you may qualify for a tax credit of $100’s per month!
Now, all of a sudden, you can get the Bronze plan for a small amount.
Smaller than what the penalty would be!
And…you actually have insurance so you don’t end up owing a hospital for years to come.
This really comes into play with health insurance for larger family of 4, 5, or more people.
What Type Of Coverage Helps You Avoid The 2017 Penalty
So, let’s say you did not have qualified ACA health insurance for all or part of 2017.
Types of ACA compliant plans:
- This could be ACA plans on or off exchange (Bronze, Silver, Gold, Metallic)
- Group health insurance through an employer
- Health Families and/or other Government options
- Indian Tribe status (not required to have coverage)
- Grandfathered health plans (plans unchanged since March 23, 2010.
If you did not have qualified coverage, then what?
There are hardship waivers you request. More information available on those here.
You may also be allowed a 3 month gap in coverage.
You still need to request the waiver for this period of time.
Keep in mind that the 2017 tax penalty for not having coverage is pro-rated.
This means that if the total penalty is $1200, it’s really $100/month.
If you have coverage for 6 months, you would be eligible for $600 in the above example.
You may also be able to get 3 months reduced from this with the gap waiver we mentioned above.
We may be able to get it down to $300.
We’re happy to walk through tax penalty mitigation at 800-320-6269 and help you plan for the next year to avoid it altogether.
What plans do not qualify?
- Short term health plans
- most association plans (watch out for these)
- MEC plans or Minimum Essential Coverage plans offered through companies
- Critical illness and/or accident plans
When Is The Tax Penalty Paid?
Tax filing time the following year.
When you file your taxes, there’s a whole section now about health insurance.
If you do not have qualified coverage or a waiver, the penalty will be either deducted from your tax refund or added to your tax payment.
Either way, it can be big wake up call since the total can be $1,000’s of dollars.
There is supposed to be a penalty for people that received a tax credit but were actually eligible for Medi-cal but we haven’t seen it applied yet.
Don’t discount the IRS from catching up with that provision going forward!
2017 Tax Penalty Wrap-Up
It’s a big hit and you’re essentially paying for other people’s tax credit.
Let us look at the combined tax credit and penalty to see if there’s a better way to play it.
We need to enroll during Open Enrollment (Nov 1st – Jan 31st) or we’re right back to incurring a tax penalty for the following year.
Our services are free to you so we’re happy to help with any questions.
Again, there is absolutely no cost to you for our services. Call 800-320-6269 Today!