Understanding the 2017 Obamacare Penalties

Written by Sample HubSpot User | Feb 15, 2017 1:30:00 PM

The Affordable Care Act will play a significant role in how you file taxes this year. If you do not have the lowest level of health insurance or failed to buy coverage at all last year, you could incur fines that take away from your refund or increase what you owe the IRS. Find out if you have to pay Obamacare fines this year or if you are exempt by learning more about the 2017 Affordable Care Act penalties.

The 2017 Obamacare Penalty Limits

The 2017 ACA penalty limits state that you must pay a fine of up to$2085 or 2.5 percent of your income if you failed to purchase and maintain bronze level health insurance in 2016. If 2.5 percent of your income is greater than $2085, you will pay that amount. Otherwise, you will pay the flat fine that will not exceed $2085 when you file your return.

In theory, the IRS will penalize you $695 for each qualifying adult and $347.50 for each qualifying child in your household. The amount cannot exceed $2085 or 2.5 percent of your taxable household income.

Obamacare Penalty Exemptions

While the penalties are supposed to encourage people to buy health insurance, some people cannot afford the premiums and run the risk of having to pay expensive fines. However, you may be exempt from an ACA fine if you meet certain criteria.

You are exempt from the Obamacare penalty if during 2017 you:

were uninsured for two or less consecutive months
lived abroad throughout 2016
were incarcerated
were homeless
were evicted from your home
received a utility shut-off notice
filed for bankruptcy
suffered the loss of an immediate family member
were the victim of domestic violence
suffered a natural disaster like a tornado or flood
incurred medical expenses that you could not pay

If you plan on claiming any of these exemptions, you must provide the IRS with documented proof if possible.

The ACA and the Trump Administration

Taxpayers this year may have less cause for worry about ACA penalties than last year. The new president campaigned on the promise of getting rid of Obamacare. He also announced that he plans on easing the penalties that people were forced to pay if they refused or could not afford to buy bronze or higher levels of insurance.

On January 21, 2017, President Trump signed an executive order instructing federal agencies like the IRS to ease the burden of the ACA on taxpayers. While Obamacare technically is still the law, it may not be by April 18, the deadline for filing taxes in 2017. Even more, the executive order minimizes the authority that the IRS has to impose Obamacare fines on taxpayers this year.

Nonetheless, figuring out if you owe an ACA penalty or if you are exempt from it this year can be confusing. To avoid paying more money than necessary to the IRS because of Obamacare, you should consult a tax professional who can help prepare your return and abide by the soon-to-change ACA law. This year could be the most challenging one yet when it comes to filing taxes and accommodating Obamacare penalties.

The Affordable Care Act requires that you buy health insurance for you and your household. If you refuse or fail to maintain coverage, you could pay Obamacare penalties when you file taxes this year.

You can determine how much if any additional money you must pay to the IRS. You also can learn to what extent the IRS can impose those fines by working with a tax professional before the April 2017 tax filing deadline.

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