You've probably heard that the individual mandate -- the penalty for not having health insurance -- for the Patient Protection and Affordable Care Act, or Obamacare, was repealed. After all, President Trump mentioned this repeal in the State of the Union, and it's been in the news a lot.
While there are concerns that the repeal could drive premiums up, you may be rejoicing if you were one of the millions hit with a tax penalty for not having health insurance. However, if you think you won't be paying this penalty when you file your 2017 or 2018 taxes, you're going to be in for a big surprise.
The mandate remains in effect until 2019
While the Tax Cuts and Jobs Act repealed Obamacare's mandate for not having health insurance, it doesn't go into effect until 2019.
This means that if you went without minimum essential coverage for a period of three or more months in 2017, or if you go without coverage for a period of three or more months in 2018, you'll still be penalized if you don't qualify for an exemption.
The penalty for 2017 and for 2018 is the greater of 2.5% of that amount of adjusted gross income for your household above the income filing threshold, or $695 for each uninsured adult and $347.50 for each uninsured child up to a maximum of $2,085.
While there were some concerns that the Trump administration may not actively enforce the mandate, those worries have largely been put to rest as the Internal Revenue Service will be more strict about requiring insurance information beginning with 2017 tax returns. For the first time, the IRS has indicated it will not accept returns if taxpayers do not provide insurance information.
Can you avoid paying the penalty?
Since the mandate remains in effect until 2019, you'll need to pay the penalty if you don't have required insurance coverage or don't qualify for an exemption. You may be exempt if:
- You can't obtain insurance for less than 8.16% of your household income
- Your income is low enough that you aren't required to file income taxes
- You were homeless or facing eviction or foreclosure
- You received a utility shutoff notice from a utility company
- You experienced a death in your family
- You experienced substantial property damage because of a fire, flood, or other disaster
- You were victimized by domestic violence
- You filed for bankruptcy
- You have substantial medical debt or incurred significant costs for caring for a dependent or a family member
- You live in a state that didn't expand Medicaid and your income is under 138% of the federal poverty level
- You experienced another hardship that prevented you from getting covered
If you don't qualify for any of these exemptions, you'll owe the penalty for 2017 if you went without coverage and will also owe in 2018 if you have no coverage for more than three months.
Unfortunately, open enrollment to get covered in 2018 is over, so unless you have a qualifying life event such as having a baby, getting a divorce, or losing a job, you will no longer be able to buy coverage under Obamacare this year.
You should budget for the penalty on your 2018 taxes if you can't get coverage through other means such as obtaining insurance through an employer.
Know the rules
Obamacare penalties can be expensive, so you need to understand that the penalty will still be in effect through 2018. You should try to get covered as soon as possible, both to avoid the penalty and to make sure that you and your family are protected in case of a serious health issue.