The Affordable Care Act's individual mandate requires that you purchase and keep a minimum level of health insurance for you and your family throughout the tax year. If you refuse or fail to buy this coverage, you could be fined when you file your tax returns. You can prepare your returns and protect your finances by knowing how you can avoid Obamacare penalties this tax season.
Inability to Afford Insurance
If you are unable to afford health insurance, you may be able to avoid paying an ACA fine this year. The IRS considers you unable to purchase coverage if the lowest priced policy available either from the ACA marketplace or your employer costs more than 8.13 percent of your household income.
Not Required to File
You also do not have to worry about paying Obamacare fines if you are not required to file a tax return. The IRS does not require people to file a return if they are single and earn less than $10,350.
If you are married and file jointly, you do not have to file if you and your spouse earn less than $20,700 in a year. The amount required to file a return varies for senior citizens and people who can claim dependents on their returns.
Qualifying Hardship
You can escape ACA fines if you experience a qualifying hardship during the tax year. The IRS defines qualifying hardships as:
- being evicted
- losing your home to foreclosure
- receiving a utility shut-off notice
- being the victim of domestic violence
- the death of an immediate family member
- filing for bankruptcy
- experiencing a natural or man-made disaster like a flood or tornado
- accruing medical expenses that you cannot pay
- experiencing an increase of household costs due to the care of a disabled or elderly family member
- claiming a child who has been turned down for CHIP as a tax dependent.
Other Qualifying Criteria
You may be able to avoid ACA penalties if you meet several other criteria outlined by the IRS. First, if you have been uninsured for two months or less during the tax year, you do not have to pay an Obamacare fine. You also do not have to pay the fine if your household income is under 138 percent of the federal poverty guideline.You can also avoid Obamacare penalties if you:
- were in jail or prison during the tax year
- belong to a federally recognized tribe
- are a member of a federally recognized healthcare ministry
- are a member of a federally recognized religious sect with a conscientious objection to Social Security and Medicare
- are a U.S. citizen and lived abroad for any period of time during the tax year
Purchase Health Insurance
Finally, the most obvious way to avoid an ACA penalty is to buy health insurance from either the ACA marketplace or from your employer. You must purchase and maintain the minimum bronze-level insurance for nine out of the 12 months. The ACA requires that employers and insurers allow you to buy insurance during open enrollment periods.
Despite the new president promising to do away with Obamacare, you still may face paying penalties for not being insured this year. The fines can claim your entire tax refund and also put a strain on your household budget.
You can file your taxes with an easier conscience by knowing how to avoid Obamacare penalties this year. You may escape these fines if you meet any of these outlined criteria before filing your returns.
