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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:

689Comments
Sep 16, 2013 1:14AM
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I do not understand why he has not been Impeached, even the idiots that voted for him do not agree with what he is doing so why is he still President?

Mar 17, 2013 3:54PM
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AFTER OBAMACARE KICKS IN AND THE PEOPLE WHO VOTED FOR HIM WILL HAVE INCREASED COSTS, TAXES ETC, AND FEWER BENEFITS, ARE THEY STILL GOING TO SUPPORT HIM?   I  BLAME THEIR IGNORANCE FOR ALLOWING THIS TO HAPPEN.  IF THEY CONTINUE TO SUPPORT HIM WHEN THEY REALIZE WHAT THEY HAVE DONE, THEY WEREN'T JUST IGNORANT BUT TRULY THEY ARE DUMB.

Feb 16, 2013 4:03AM
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Thats right people......"bend over"

even the individuals that voted for obama......you are included and will "DO AS OBAMA DICTATES"

OR "WHOA BE TO YOU"!

Feb 12, 2013 3:51PM
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So, those of us who already chose to feed our families instead of buying health insurance now have what option?  We either buy the insurance, and cut the already tiny grocery budget down further, (because it's one of the very last areas that can possibly be parred down) or don't buy the insurance and still have no money for food because I have to pay the fines, and yet still have nothing to show for those fines.  What's it going to do for the health of those people who now have to buy more processed (read "cheaper") foods and turn the heat down even further even though it's already chilly in here.  Those things aren't going to make me more healthy, not to mention how the stress of less money is going to mess with my immune system.  And before someone says it...  I have internet and a computer because I use them for my work, and my employer pays for them.  So no, it's not an extravagance.  And I'm just using my own family as an example.  We aren't rich or even particularly comfortable, but there are people in even worse shape than us who are going to be hurt by this.  This is a no-win situation.


Feb 11, 2013 10:46PM
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this clown is one piece of **** president, calling him a piece of ****  is an insult to a piece of ****, i wouldnt listen to this moron tell me how to put air in a bicycle tire, chocolate stalin should find the toilet bowl that he popped out ofand flush himself. ****ing guy is a load that should have been swallowed.
Feb 11, 2013 5:33PM
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FACT IS THIS PRESIDENT HAS DONE NOTHING BUT SCREW OVER HARD WORKING AMERICANS. AFTER ALL THE COMMENTS I HAVE READ HERE. I AM WONDERING WHO THE HELL VOTED THIS IDOT IN TRULY!!!! MOST OF THE SMART POPULACE HATE THIS IDOIT!
Feb 11, 2013 5:27PM
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Mickey82 pretty much nailed it! NUFF SAID!

Feb 11, 2013 5:26PM
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Just look at the headline "Obamacare and your 2012 tax return" that's scary. NUFF SAID! I hope all you liberals enjoy the next very sad 4 yrs.
Feb 11, 2013 5:23PM
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WOW!! I am not even touching this liberal backed subject... talk about F*&^%$ the US Constitution. All I can say is all you liberals that voted this idiot in office I truly hope you enjoy Obama F&#$ you care. 
Feb 9, 2013 1:14PM
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When a nation, in the collecrive, becomes so ignorant as to rely on news and politicians for their reality, they are easily led to bad choices that sooner or later . I am amazed at the number of people who believe the healthcare bill  means free healthcare. While it may be for some, the realty is that most will pay dearly for less coverage.

This admin, congress and the media twisted, lied and cut back room deals, still doing it, to be able to make public declarations, of reform. While chronic lying has become a prerequisite for political office, it doesnt surprise me that nearly all government programs have self perpetuatiing elements focusing on buying votes through enttlements and favors while exempting  themselves and their supporters.

The only reason, I think, that their isnt a national outrage over the healthcare bill, as it is now, is that people arent paying attention , the media continues to spin it as a good thing, and the public is simply too ignorant and apathetic to get involved in reforming the reform.

The recent estimate that the bill will cost $2.8 trillion over 10 years instead of the $900billion originally forecast coupled with the forecast out this week that SS and health care costs will be up to $3 trillion/yr in 10 years should scare the heck out of everyone. That is approx the ENTIRE revenue intake of the fed govt. 

Feb 9, 2013 9:51AM
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Thanks for another Obamanation!

What are President Obama's Policy Army doing about the real problem - health costs charged?  I retired in 2012 and have focused on the costs for services rendered.  Looking at insurance claim settlement, I was taken back by the charges and discounting games going on.  Let's take a typical visit to your general practitioner for say a cold you have.  First you pay a co-pay of say $25 for the visit. which includes the nurse taking your vitals and blood and urine samples that go off to a lab, the doctor seeing you for 10-12 minutes after which he suggests an antibiotic/rest remedy and hands you a prescription to fill and asks for a follow-up visit in 10 days after you have taken all the medicine prescribed .  Second, you pay a variable co-pay for the antibiotic (depending on which tier the medicine falls under and heaven help you if the doctor did not prescribe a generic brand) and read the paperwork that comes with the medicine where the pharmacy tells you that the ACTUAL cost of the medicine was 10X or higher than what you paid.  Third you get a claim settlement from Medicare that shows your doctor charged you $200 for the visit but medicare negotiated with the doctor a visit charge of $125 of which they will cover $95 (fair and reasonable cost for your area given as the reason).  Medicare then advises that they have sent the residual claim to your Medigap insurance company and advises what you MAY owe.  Fourth, your Medicap insurer sends you a claim statement that says they covered the rest ($125-95 = $30 less that $25 you originally paid, so $5 and they make you feel good by saying you owe no more.

This 'kabuki dance'  took about 60 days to go full cycle.  How many people do you think 'touched' this claim?  The doctor got $125 for the 12 minute visit and he is happy because he thought he would only get $95 (fair and reasonable).  You have been to your follow-up visit where he tells you all your lab tests came out fine and after he looks at you declares that you are better.  You have two other claims going through processing (the lab tests and the second visit).  The labe tests results in you having to pay about 35% of the negotiated charge and the second doctor visit follows pretty much from a claims and result standpoint as the first visit! 

I know I should be happy that I at least have insurance and have the money to pay for this but let me give you another short story.

When I was a child - my mother took me to see the doctor for a bad cold, he saw me, gave me a shot and the medicine (no pharmacy visit) and my mother paid him in cash a visit charge.  That was it!  President Obama - your policy makers should be working on getting back to simple (KISS) - not a multi-100 page legislation that makes things more complicated and frustrating for the average joe.  What we now have is a malarkey to coin a phrase used by Obama's partner in this travesty - VP Biden 
Feb 8, 2013 8:07PM
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How about the exemptions for Muslims....my God.....wake up America.....if not now how about waking up to an 'internal security force'......I'm telling you and mark my words......we will never get rid of this lying, Chicago thug.

 

Feb 8, 2013 8:06PM
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Who in the hell, wrote and or devised this ****?  Impeach this clown while we have a chance or it will definitely 'be over'......if it already isn't too late.

 

Romney was right about the 47%.

Feb 8, 2013 4:02PM
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Hilliary has a better change bein elected a dog catcher in Washington DC then being elected to anything. The sting of Bengazzi was carefully posphoned until she was out of office so what else is new. Facts are bengazzi is Hilliarys sword she fell on and nothing will bring those dead people alive to tell the nation what actually happened. The current administration lame duck POTUS whitewashed this incident and the entire truth is hidden from the public eye along with the college transcripts for the POTUS. The next election votes maybe written on old dollar bills as the economy can't handle the past two presidents major policy mismangement with out crashing and burning.  
Feb 8, 2013 3:40AM
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the race to dumb is a long one. you never know till the very end that you've won it.

Feb 8, 2013 2:14AM
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we may not have a king but we are still being ruled.
Feb 7, 2013 4:31PM
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The US Department of Budget recently released figures on what a average welfare person gets paid if all of their entitlements are added up. Their number is 168.00 a day or around 30.00/hour for a 40 hour work week. Why should a worker work. pay taxes and then earn 9.00 less an hour. These numbers are for a single person so a mother with 5 children is being paid about 1008.00 a day for sitting in front of their 53" plasma tv screen for 16 hours a day. Something is seriously wrong with me working for a living in the USA it appears. Even with a Masters in my career field I would not earn close to 30.00/hour  
Feb 7, 2013 1:39PM
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Another grand idea for improving the taxable income to the IRS is to limit the types of food purchased with food stamps. Just the basics and no frozen entrees, No expensive cuts of meat allowed. No sweaten foods like soda with sugar or pastry. Make these welfare people cook their food from the basic foodgroups and see how many welfare people starve. Contact your Congressman ans suggest taxing welfare payments and restrict the food types that can be purchased with food stamps
Feb 7, 2013 10:43AM
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Talking with the director of finance where I work I was told yesterday that they think the US will have the employers consider my healthcare as income and tax that and deduct from my paycheck each month. My healthcare being taxed is a travesty and retirement seems the better thought. Living on my 5500/month retirement in Costa Rica looks better and better
Feb 7, 2013 10:08AM
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No reform as long as there are exemptions, including congress and unions. No tort reform, no reform in medical system.

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