The big question of the 2014 tax year is, how will we be effected by Obamacare and taxes?
Do you understand the effect Obamacare has on your taxes? If you aren’t up to date on the health insurance situation, your tax return could be at risk.
Obamacare (the Affordable Care Act) requires almost all U.S. citizens and legal residents (and their dependents) to have health insurance for the entire year (starting January 1, 2014). For all those without health insurance there will be a tax fee during 2014 and beyond. This fee will be paid when filing for your tax return.
Obamacare and Taxes
What if you didn’t or still don’t have health insurance?
Because of the changes to the laws, Obamacare and taxes have a direct correlation. Those who do not have health insurance throughout the year are going to feel the brunt of it. If you chose not to buy health insurance in 2014 you will pay a fee known as the individual shared responsibility payment when you file your tax return. So, what are your options? Open Enrollment for 2014 is over. In most situations you are ineligible to enroll in a private health plan for the rest of 2014. The few qualifying life events that are exceptions include: marriage, birth of a child or losing another health coverage. If any of these apply to you, you could be eligible for a special enrollment period that will still allow you to buy coverage on the Marketplace on HealthCare.gov.
If your company employs more than 50 people they are probably obligated to offer you health coverage. You should check with them. If they offer health insurance to any employee then they must offer it to all employees.
Tax Payment for Not Having Health Insurance
If you are not covered by health insurance in 2014 you will owe a tax fee payable at the time you file your 2014 tax return. According to the current law this payment will be phased in, taking full effect in 3 years.
The repayment based on Obamacare and taxes will either be a Flat Fee or the Percentage of Household Income, whichever is higher.
For 2014, the Flat Fee per adult is $95 and per child is $47.5, but not over the maximum of $285 per family.
The Percentage of Household Income for 2014 is 1% of your taxable income over the minimum filing amount for you filling status. However it will not be over the average cost for the bronze level health plan available through the Marketplace in 2014. 2014’s average cost for bronze level coverage is $204 a month for an individual, and $1020 per month for a family with 5 or more members. It is important to remember that the higher fee is the one owed at the time of the tax return.
The same method will be used in 2015 and 2016 but the dollar amounts will change for those years. For 2015 the flat fee will be $325 per adult and $162.50 per child, with a maximum of $975 per family. The Percentage of Household Income for 2015 will be 2%.
In 2016 the flat fee will be $695 per adult and $347.50 per child, with a maximum of $2085 per family. The Percentage of Household Income will increase to 2.5%.
If you need help understanding Obamacare and taxes don’t hesitate to call DeFreitas & Minsky Certified Public Accountants can help sort everything out. Call us at 516.746.6322 for more information.