Smart SpendingSmart Spending

Obamacare and your 2012 tax return

Your adjusted gross income for 2012 could have a profound impact on how much you pay for health insurance next year if you don't get coverage through your workplace or a government program.

By MSN Money Partner Feb 5, 2013 3:14PM

This post comes from Jonnelle Marte at partner site MarketWatch.


MarketWatch logoStarting next January, the Affordable Care Act mandates that every American have health coverage, and those who remain uninsured will pay a penalty. The extent to which one is eligible for federal subsidies to buy insurance, and the penalties for failing to comply with the mandate, will both be determined using one number: the adjusted income reported to the Internal Revenue Service this year.


Image: Medical doctor (© Digital Vision/Getty Images)"So much of the Affordable Care Act is being implemented through the tax code," says Kathy Pickering, the executive director of the Tax Institute at H&R Block. And for many taxpayers, "their tax situation will factor into health care decisions as well," she says.


The penalty, which was upheld as a tax by the U.S. Supreme Court in June, will vary per family based on their size and income. The fee starts at $95 per person next year, or 1% of household income above the minimum threshold for filing a tax return -- whichever is greater.


And the penalty is scheduled to increase each year to $695 per person in 2016, or 2.5% of income. (After that, the penalty will be adjusted each year for inflation.)


For a single person with $50,000 in taxable earnings, the charge would start at $400 next year, estimates H&R Block. And for a family of four with two children and a household income of $100,000, forgoing insurance would add another $800 to their tax bill -- a sum that would be deducted from any refunds. (The penalty is cut in half for children.)


The government will provide subsidies, which would cap how much families spend on insurance premiums to a portion of their income. The subsidies will be available to those earning incomes of up to 400% of the poverty rate, which works out to roughly $45,000 for an individual and $92,000 for a family of four. (See the H&R Block Health Care Estimator.) 

To be sure, people who get health insurance through their employers or through a government program like Medicaid will not be impacted by the penalty. But those shopping for insurance on the individual market may still opt to pay the penalty, experts say. Annual health insurance premiums for people working at small firms averaged $5,600 for individuals and $15,200 for families in 2012, according to the Kaiser Family Foundation. (Of course, the decision to remain uninsured could end up being far more expensive if individuals face unexpected medical emergencies.)


In order to avoid the penalty, taxpayers will need to buy the minimum amount of health insurance required under the health care law. One way to meet that amount is to purchase a plan offered in the individual insurance exchanges being set up by health care reform, where individuals or small-business employees can shop for health coverage -- possibly with the help of federal subsidies.


Levels of coverage will vary, and some plans will have to offer essential benefits including hospital, emergency, pediatric benefits and other services. Dental-only plans, for example, won't be enough to avoid the penalty.


Tax preparers say clients are already asking questions about how health care reform will impact their tax bills -- and vice versa. At H&R Block, preparers are calculating what a taxpayer's insurance costs might be by using their returns to estimate the federal subsidy they might receive. They're also talking to families about what penalty they would have to pay over the years if they decide not to buy insurance.


Mark Steber, chief tax officer for Jackson Hewitt Tax Service, says they are fielding questions from taxpayers on the penalty and how insurance subsidies will work, and that the firm is evaluating if it will add a health care component to its tax prep services.


More on MarketWatch and MSN Money:

Feb 6, 2013 9:20AM

Did you honestly think the government was going to foot the bill for your health care? Hahahahah!!!!!!

This is the part where all those people who voted for this crap begin to realize that maybe they should have read the proposal before getting on board with it, you know.....the part where they say "what have I done to myself!"

Feb 6, 2013 9:15AM
This plan is not going to be good for anybody...did you see the article about hospice starting too late?  It's on the MSN page today.  That study is what the government will tracking us to earlier death.  But we had to go poo poo Sara Palin.  If Bush (One) didn't just spend 45 days in ICU and rushed to hospice, He'd be dead instead of enjoying the winter.  Democrats, this is a perfect example of why we don't want government running our healthcare.
Feb 6, 2013 8:51AM
Hey catch22ofnj, not one republican voted for Obama Care so its incorrect to say "both parties" when commenting about this article.
Feb 6, 2013 8:45AM
used to be the surplus population would pack into the ER. not anymore, now they will be sitting next to you @ your doctors office and YOU are paying for it! plug your nose, your wait just doubled.....
Feb 6, 2013 8:33AM
I anticipate an increase in the amount of welfare recipients.. Why work for a living and be broke because of his obamacare when you can be broke and have the government pay your way..
Feb 6, 2013 8:30AM
Everyone know health care was a problem, but obamacare want the answer there is more hidden pork in the bill.  Nancy said you have to pass it to find out what in it.  We all are f'd.  The big push was do you want to see grandma without health care, one part I read quit didnt understand the legal jargon but basically stated  medication would not be paid for after age 75.
Feb 6, 2013 7:44AM

Fact....  Republicans are either rich or un-educated

Fact....Studies show Republicans have a significantly lower IQ....than Democrats

Which are you?

Feb 6, 2013 6:59AM
Its nice to see that there ARE people out there that actually know what's coming down and what's still in the pipeline. This obamacare is going to make a train wreck look like a fender bender.
Feb 6, 2013 3:54AM
I can't think of any other time that our government has mandated that we buy something and for them to also give us fines (extra taxes) for not complying is just an extra slap in the face. Wake up people your rights are decaying at an unprecedented rate. It won't be long before they will be at your door demanding all your weapons , for your own safety of course.   
Feb 6, 2013 2:01AM
I did my part. I didn't vote for obama.  So sad our children and grandchildren will be burdened with this generations poor decisions at the voting booth.  Be careful what you vote for. 
Feb 6, 2013 1:55AM

Oh well, what is there to say that you got what you voted for, even though most of you have not voted for Mr. Obama, but you will have to suffer through his policies because he won the election just asking it to you that to I one get over it. That's what you say and oh by the way. All the unions are exempt from Obama care, at least up to year 2020. I think all these liberals handed out all kinds a waiver stuff all their good soldiers. That paid their way to the White House again, California Nancy Pelosi's home state.

She passed out all kinds a waivers and a few other ones did. Too imagine if you go on the government site you can find them all, I think you know that so were all in for the ride, whether be like it or not, but there's one thing that can happen to put a stop to this, but I don't think the Republicans have enough colonies to do it in that stop funding it. That's all. They got a do is save Mr. Pres., were not funding Obama care anymore.

Now do you think that would go over with the mainstream media. They would have a field day would they I can see the news headlines now the Republicans. Why kill the poor people and grandma and grandpa to by not funding Obama care, let's not forget the little kids this isn't going to stop illegals from getting healthcare all they have to do is walk into any hospital emergency room and they will be treated and no, he will not be turned in for be any legal aliens because hospitals will do that they were told not to do that by their administrators, so the so they can get refunded from the government for their services.

Those are facts. That's what happens in this country, so if you think it's bad now just wait to 2016, when it really kicks in all those extra taxes in this bill will definitely bankrupt this country and asked exactly what Obama wants to do bankruptcy United States to the point of no return. That's his revenge for his father and his people in Kenya where you believe it or not I really don't care that's what you people voted for this is what you get the rest of us just goes along for the ride and watches country fall and fall it will. As long as this man's in charge.

Feb 6, 2013 1:20AM

Whayever you do. Don't Rattle A Liberals Cage - These Animals Are Taking A Nappy Nap for Their Nappy Hair And Beauty !


LIKE OBAMACARE - The Doors Open Wide For FRAUD And WELFARE CHEATS - So Time To Get On Welfare Eh' ...........




Feb 6, 2013 1:18AM

What will the Educators do when we vote for Less Taxes, they have to pay for their own OBAMACARE  and Give Kids  A Hand Up ?


Aren't You Glad You Voted For OBAMA - You Get To Pay More TAXES.......... Not What You Figured On Eh' LIBBY LIBS ?


OBAMA Lemmings.............. Over The Cliff We Go Into The Abyss !

Feb 6, 2013 1:09AM
smh.........Smh...............SMH !!!!!!!!!!!!
Feb 6, 2013 12:34AM
This was & is such a f****ed up law.... Instead of following a proven, common sense path, (deregulation & allowing insurance companies to compete across state lines). We are now stuck with yet another bloated bureaucracy... Hows that hope & change working out for ya now folks?
Feb 6, 2013 12:29AM
Ladies and gentlemen, bend over and grab your ankles and don't forget the vasoline....  It WILL BE PAINFULL......
Feb 5, 2013 11:54PM

What a (*^(*&^(*&^ bunch of douche bags for voting Nobama in. Now we all have to suffer this BS

I dont want healthcare .I am fit and healthy and my parents lived well into their 90s. Just wait till all these   illegal's get their Tax return taken  away LOL TOO LATE !!!  I don't want to pay for health insurance  and I sure as hell don't want to be fined for it .Wake up America  Pay Attention!!!!!!

Feb 5, 2013 11:50PM
Stupidity is always been painful.....Affordable Health Care Act.   Undocumented immigrants are excluded but Americans must show proof of health insurance coverage?
Feb 5, 2013 11:46PM
Shut off funding for welfare unemployment then because they dont carry health insurance because they cant afford it.
Feb 5, 2013 11:43PM


I'm going to post a quote.  It has the "n" word.  It is from Sammy Davis Jr.'s autobiography "Yes I Can."  MSN will probably have to delete the post and I certainly understand and agree.


Anyway .  .  .



"Tomorrow morning, when you wake up, you'll still be a nig___er."





Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
100 character limit
Are you sure you want to delete this comment?


Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.


Smart Spending brings you the best money-saving tips from MSN Money and the rest of the Web. Join the conversation on Facebook and follow us on Twitter.