Shared Responsibility Payment – Penalty for Being Uninsured
Penalty Calculation - There is a penalty for not having health insurance unless one of several exemptions is met. The penalty is being phased in over three years. The monthly penalty for 2016, the final phase-in year, is the greater of $57.92 per uninsured adult plus $28.96 for each uninsured child (under age 18), but not to exceed $173.75 per month for a family, OR 2.5% of household income in excess of the individual’s income tax filing threshold divided by 12. Filing threshold is the sum of the standard deduction and personal exemption amounts for the filer and spouse, if any.
The penalty can never be greater than the national average premium for a minimum essential coverage plan purchased through a government Marketplace.
Example: A married couple without insurance in 2016 has one dependent child and a household income of $50,000. The couple’s standard deduction is $12,600 and with two exemptions at $4,050 each, their filing threshold for 2016 is $20,700. Their monthly penalty is the greater of $144.80 (2 x 57.92 plus $28.96) or $61.04 (.025 x ($50,000 -20,700)/12). Thus their monthly penalty would be $144.80.
Penalty Exemptions - Certain individuals are exempt from the health insurance mandate and are therefore not subject to the penalty. Included are:
- Those unlawfully present in the US.
- Those whose income is below the federal tax filing requirement (the sum of the standard deduction and exemption amounts for the filer and spouse, if any).
- Those who cannot afford coverage based on formulas contained in the law (generally when the cost of the insurance coverage exceeds 8.13%* of the individual’s household income).
- Members of American Indian tribes.
- Incarcerated individuals and certain religious objectors.
In addition, there is no penalty when the first lapse in coverage during a year is less than three months. Also, a number of hardship exemptions may be available. Some of the exemptions require completing and filing an application for approval with the Marketplace (Exchange) – either on the individual’s state’s Marketplace web site or at www.healthcare.gov if the state doesn’t have its own Marketplace. If approved for one of the exemptions requiring specific approval, the applicant will be issued an exemption certificate number (ECN) that must be included on his or her tax return to claim the exemption.
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