How to Avoid the Obamacare Tax Penalty
Millions of people can avoid the tax penalty without having ACA compliant health insurance. The most overlooked exemption is the Income-related Exemption where the lowest priced coverage available to you either on Healthcare.gov (or your state exchange) or employer coverage, would cost more than 8.05% of your household income.
What to know about this exemption
- Health Insurance overage is considered to be unaffordable if the lowest priced Bronze tier health plan available to you through the Marketplace or your state market place in 2015 is more than 8.05% of your household income.
- The entire cost to you and family on your tax return must be more than 8.05% including the premium tax credit you would qualify for if you enroll in that plan.
- If you qualify for this exemption, it may apply to everybody on your tax return who doesn’t have coverage in 2015.
Click here to learn more or to file for exemption.
A 59 year old and 60 year old couple who live in Clark county, NV try to purchase health insurance through Healthcare.gov. Their income is $90,000 and over the $63,720 (400% of Federal Poverty Level for 2 people) threshold to qualify for a subsidy. The lowest cost plan for the 59 year old will cost $432.31 a month and the lowest cost plan for the 60 year old is $450.74. This approximately adds up to $11,295.96 a year which is more than 8.05% of their income.
Under the income-related exemption rule they may file for an exemption to avoid the Obamacare tax penalty if they don’t purchase ACA compliant health insurance.
Other Exemptions to Avoid the Obamacare Tax Penalty can be found here.
Are There Other Options for Health Coverage?
Yes. There are still health underwritten plans that are called Short Term health insurance plans. These plans are considered major medical because they will cover major accidents and illnesses up to a certain amount, most cover up to $2 million. Most short term health insurance plans won’t cover doctor copays or prescriptions.
Ancillary plans like accident and critical illness coverage will supplement a short term health plan and will pay towards or all of the deductible. Learn more here.