By: John J. Kasperek, President
You are understandably concerned about the health care mandate and what it means to you. Here are some Frequently Asked Questions to set the record straight:
What is the Health Insurance Mandate? Non-Exempt US citizens and legal residents will be required to have health insurance coverage or pay a financial penalty (tax) for noncompliance.
When does the Mandate Take Effect? January 1, 2014.
What does “non-exempt” mean? Anyone above the income tax filing threshold is not exempt from having to pay the tax for not having health insurance.
Filing threshold is the income level you have for when you have to file an income tax return.
If you’re single for 2012, the filing threshold is $9,750 for most; if you make more than $9,750, than you are required to have insurance or pay the penalty. If you’re married, the filing threshold for most is $19,500 for 2012. The filing threshold will be change by 2014, but probably not by much.
What is the financial penalty (tax)? For 2014 the penalty for not having health insurance will be $95 or 1% of your income over the filing threshold – whichever is greater.
Let’s look at a single person who makes $25,000 a year…..
Subtract the filing threshold (using 2012 numbers) from the income. 25,000 – 9,750 = $15,250.
Then multiply $15,250 by one percent or .01 for $152.50.
Since the $152 is a bigger number than the $95, that’s what the single taxpayer pays.
Let’s look at a married couple (just husband & wife) who makes $25,000 a year…..
Subtract the filing threshold (using 2012 numbers) from the income. 25,000 – 19,500 = $5,500.
Then multiply $5,500 by one percent or .01 for $55.00.
Since $55 is less than the $95, then the married couple in this example pays the $95 minimum.
Based on the 2014 examples above, the tax seems low. Why the fuss?
The penalty (tax) increases significantly for 2015 & 2016. Here is a table:
Year Minimum Penalty Percentage Excess Household Income
2014 $ 95 1.0%
2015 $325 2.0%
2016 $695 2.5%
Now, let’s look at a single person making $100,000 in 2016….
$100,000 – 9,750 = $90,250 excess household income
$90,250 x .025 = $2,256 Penalty (tax) for not having health insurance.
(Note that the filing threshold is different for people over 65 and those with dependents).
By 2016, when the mandate really kicks in, you can see that the burden for not having health insurance will be steep.