If a taxpayer, their spouse (if married and filing jointly) or any of their dependents did not have minimum essential health care coverage or a health coverage exemption for each month during 2014, they will be required to compute and report a health care penalty (a.k.a. shared responsibility payment) on their 2014 income tax return.
The health care penalty will be the greater of the following:
- 1% of household income that exceeds the tax return filing threshold for the taxpayer’s filing status, or
- The family’s flat dollar amount, which is $95 per adult and $47.50 per child, up to a family maximum of $285.
The total health care penalty is capped at the cost of the national average premium for a bronze level health plan available through the insurance marketplace. For 2014, this amount is $204 per individual per month.
Household income is the taxpayer’s modified adjusted gross income (MAGI) plus the MAGI of every other individual in the family for whom the taxpayer can claim a personal exemption and who is required to file a federal income tax return. Individuals, who file only to claim a refund of federal income tax withholding or estimated tax payments but would not be required to file otherwise, are not included.
MAGI is computed by determining an individual’s adjusted gross income and adding the following:
- Foreign income,
- Nontaxable Social Security benefits (not Supplemental Security Income),
- Nontaxable tier 1 railroad retirement benefits, and
- Tax-exempt interest.
If you did not carry minimum essential coverage (e.g., qualified health insurance through your workplace or an insurance marketplace, Medicare, Medicaid, etc.) during 2014, contact Flexible Accounting Services of the Triangle and allow us to assist you in determining whether you qualify for a health coverage exemption or if you are required to pay the health care penalty created by the Affordable Care Act.