What is the penalty if I don’t have health insurance?

With the increases we’ve all seen with individual health insurance policies, we’ve been hearing this question a lot.

The IRS, on your tax return, will have a calculation for a shared responsibility payment that is the LARGER of 2 amounts.

For 2015 these are:

  1. $325 per adult and $162.50 per child with a family cap of $975. OR
  2. 2% of household income over the filing threshold

For 2016 these will be:

  1. $695 per adult and $347.50 per child with a family limit of $2,085 OR
  2. 2.5% of household income over the tax filing threshold.

These penalties are calculated by month, but remember, it is the larger amount of the two tests.

Example: Jack & Jill have 2 children and did not have health insurance for all of 2015. Their only income is wages of $75,000. For 2015 their shared responsibility payment will be the larger of:

  1. $325 * 2 + $162.50*2 = $975 or
  2. $75,000 - $20,600 (the subtraction allowed for a couple filing a joint return – this number is different based on your filing status) = $54,400 times 2% = $1,088

Their 2015 penalty would be $1,088.
For 2016 with the same facts, the penalty would be the larger of $2,085 or $1,360. $2,085

This is why you will be receiving forms from your health insurance company about your coverage for 2015 and these are the calculations you need to look at since there is still a little time to sign up for health insurance for 2016.

Please call us if you have questions.