With the press conference this morning from President Obama about the millions who received cancellation notices, President Obama has given the authority to the State Insurance Commissioners to extend coverage for another year. Now, my family was one that got such letter, and I am hoping that they do extend our insurance, if not we will go uninsured and face the penalty.
So, I thought I would write about the Penalty that is supposed to be in effect on your 2014 Tax Return.
As a Tax Preparer I get a lot of question about the new “Obama Care” penalty and how it is going to effect them.
Here are two of the questions that I have gotten:
- What will be my penalty if I don’t get Insurance?
- I have a child that is 23 and they don’t live with me, do I have to provide Insurance for them?
After researching these two questions here are my interpretation of what I read:
- According to the Affordable Care Act Chapter 48 “Sec. 5000A. the penalty is $95 per person that does not have insurance over the age of 18. If you have a dependent under the age of 18 the penalty is one-half of the penalty. Now the fun part: The other part of the penalty is OR 1% of the “Household Income” “Modified Gross Income“. Which ever is larger.
- Household Income – This is the income of You and your spouse, plus the income of any dependent that is required to file a tax return.
- Modified Gross Income – You take the your Adjusted Gross Income (which is the last number on page 1 of your tax return) subtract your Standard or Itemized Deduction add any tax exempt interest.
- Adjusted Gross Income – Standard/Itemized Deduction + Tax Exempt Interest = Modified Gross Income
- According to “Section 2714 Extension of dependent coverage” – Group health plan and a health insurance company has to allow you to continue to coverage your adult child (who is not married) until the child turns 26 years of age.
Going back to Chapter 48 “Sec. 5000A. – Family Size is equal to the allowed personal exemptions for that calendar year.
So, the way that I read the Act – if you can’t claim them on your Tax Return there is no requirement for you to put them on your plan.
We will see what happens between now and January 2015 if this will change or stay the same.
Gabe The Taxguy