Since January 2014 the Affordable Care Act mandates that majority of Americans have health insurance or pay a tax penalty. If taxpayers decide to obtain their health insurance through the Health Insurance Marketplace, they potentially could get tax credits that could make their monthly premiums more affordable.
These tax credits are for those who are not eligible for affordable health insurance from other sources and those who are within two to four times of the federal poverty level. During the 2014 open enrollment, 85% of taxpayers who purchase insurance through the marketplace went with plans that included financial assistance.
When you file taxes with Turbo Tax, you are able to estimate your annual health insurance premium and tax credit. However, keep in mind you have to have purchased insurance via the Marketplace to be eligible for this credit.
The individual shared responsibility payment
If you decide to not sign up for health coverage and do not qualify for an exemption, you will have to pay a penalty when it comes time to file your taxes. This penalty is called, “the individual shared responsibility payment”.
The payment amount for 2014:
- 1% of your household income that is above the tax return threshold for your filing status
- A flat rate – $95 per adult, $47.50 per child, with a maximum of $285
(The penalty phases out at the national average premium for a bronze level plan through the Marketplace)
The payment amount for 2015:
- 2% of your household income that is above the tax return threshold for your filing status
- A flat rate – $325 per adult and $162.50 per child
Each year the penalty amount increases. Some individuals will qualify for exemptions.
Since 2014 there have been many Obamacare tax credit calculators popping up all over the internet. These tools serve the purpose of helping you understand the Affordable Care Act in a money perspective.
The TurboTax health exchange is your go to source so you can see how much your premium tax credit will be. You can also see what penalty you can expect to pay in the event that you decide not to sign up for health insurance and more.
Tax credit options
When enrolling in the Marketplace for health insurance with financial assistance, you have the following options.
- Get it now – When signing up you can have all or some of the estimated credit applied to your premium.
- Get it Later – You can claim the credit when it is time to file taxes
Keep in mind that if your family or income changes throughout the year it influences your premium tax credit. You have to report any changes to the exchange so they can make the appropriate adjustments.
Failing to do so could cause you to have to pay money back when tax time comes around. Additionally, if your income decreases you may be eligible for a refund.
To learn more about health insurance coverage and how it influences your tax situation make sure you visit TurboTax health.
Keep in mind if you file your taxes with TurboTax online you will receive your largest refund possible because they make sure that you are aware of all of the deductions and credits that you are eligible for.