The short answer is that the penalty for not having health insurance in 2017 can be as much as $2,085, or 2.5% of your income, whichever is higher, as part of the Affordable Care Act. However, this doesn't tell the entire story. There are more details behind these numbers, as well as some exemptions that might apply to you. In addition, the election of President-elect Donald Trump as well as a Republican majority in both houses of Congress could potentially eliminate the 2017 penalty entirely.
The 2017 Affordable Care Act penalty
If you can afford health insurance (more on that shortly), but choose not to buy it, you might have to pay a fee. This is officially known as the individual shared responsibility payment, but is also known as the "Obamacare penalty," "Obamacare fine," or "individual mandate."
If it applies to you, the fee is due with your tax return for the year you didn't have coverage. For example, if you didn't have health insurance in 2016, any penalty due would be paid with the tax return you'll file in 2017.
The penalty is calculated in two different ways, and is assessed for any month you, your spouse, or your dependents didn't have qualifying health coverage. You'll pay the higher of the following methods for both 2016 and 2017:
- 2.5% of your household income, capped at the national average premium for a "Bronze" health plan sold through the marketplace. This percentage is based on the portion of your household income that's above the tax filing threshold ($10,350 and $20,700 for singles and married couples, respectively, for the 2016 tax year).
- $695 per adult and $347.50 per child under 18, up to a maximum of $2,085.
If you had coverage for part of the year, the fee is assessed at 1/12 of the calculated amount for each month you don't have coverage.
It's also important to mention that the IRS cannot be enforced through jail time, liens, or other collection activity. The only method the IRS can collect the fee if you choose not to pay it is by withholding money you would otherwise get back as a tax refund.
Exceptions to the rule
Here's where it gets a little complicated. There is a list of exemptions to the individual shared responsibility payment, and if you qualify for one, you won't have to pay any penalty for not maintaining coverage.
You can read a full list of these exemptions on www.Healthcare.gov, but here are a few of the most common:
- You're exempt if the lowest-priced coverage available to you would cost more than 8.13% of your household income.
- You're exempt if you were uninsured for no more than two consecutive months during the year.
- You're exempt if you're a U.S. citizen living abroad.
- You're exempt if you're incarcerated.
- You're exempt if you can demonstrate that you experienced a hardship during the year.
Will these penalties and exceptions even matter in 2017?
President-elect Trump has pledged to repeal the Affordable Care Act quickly once his administration assumes office, and to replace it with a much "better" piece of legislation. This would mean the elimination of all taxes and financial penalties that are part of the Act, such as the 3.8% surtax on the investment income of higher-earners, as well as the penalties discussed here.
What's unclear is whether there would be a different penalty attached to the replacement plan, and how quickly the Affordable Care Act could realistically be repealed and replaced. That's why even though Trump has promised to get rid of Obamacare, it's important to know the penalties and exceptions for 2017.