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.
This post comes from Jonnelle Marte at partner site MarketWatch.
Starting 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.
"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:
for all of you who gives the thumbs down we know your obummer loves and obamass sniffers
Plain and simple, If you voted for obama shut up and pay your dues, you have no right to complain, shut your mouths and stop your whining. act like the big tough guy now. you were all warned, you were too stupid to listen, you deserve what you have comming to you. I will laugh at you now. ha ha ha ha.
I see a lot of people deny voting for this "skeet shooter n chief" but he got elected by more than 50% of the vote and you all knew exactly what you were getting. It's going to get worse and worse and he will blame George Bush for everything even when his term is up. It's a terrible plan, you all could have voted the other way and now we're all stuck. The poor weren't paying medical bills bills to begin with and it won't change
If one didn't fall for Barry's lies should one be required to pay for them?
mmm, mmm, mmm!
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