How Does The Affordable Care Act Affect Your Taxes?

For most of you, it won’t affect your taxes at all if you’re covered by an employer sponsored insurance plan. The cost of that shows up on your W2.

For those of you that have purchased health insurance through a government sponsored marketplace, you should receive a new form, 1095. This form lists information showing what months you were insured and costs. Dependent upon your income, you may get a tax credit which is a direct reduction of your taxes rather than a reduction of your income. That’s a good thing.

There are many who have chosen to not purchase any health insurance. For those of you that have done this, there’s a penalty. Ouch.

Here’s what the government says at HealthCare.gov:

If you didn’t have coverage in 2014, you’ll pay the higher of these two amounts when you file your 2014 federal tax return:

• 1% of your yearly household income. (Only the amount of income above the tax filing threshold, about $10,150 for an individual, is used to calculate the penalty.) The maximum penalty is the national average premium for a bronze plan.
• $95 per person for the year ($47.50 per child under 18). The maximum penalty per family using this method is $285.

For example, a single person that earns $35,453 would end up being penalized $253. ($35,453 – $10,150 = $25,303 x 10% = $253). The thresholds vary based on your filing status and your age.

For many, especially younger people in good health and a lower income, paying this penalty is more practical that having to shell out $250 + a month for insurance. It’s expectable and understandable.

You can find out more at: https://www.healthcare.gov/ and https://www.mnsure.org/ or https://www.ucare.org/Pages/default.aspx.