ObamaCare, also referred to as the Affordable Care Act, has undergone many changes since it was initially proposed in 2010. When the legislation was signed into law, few citizens knew that they may become subjected to a new tax. However, after a lengthy court battle, it was decided that the US government could be allowed to levy a tax (also known as a “shared responsibility payment”) on those citizens falling short of the necessary coverage guidelines.
In this post, we’ll take a closer look at what this means for you and your annual tax return.
What are Shared Responsibility Payments?
Designed with the ultimate goal of moving toward a universal healthcare system in the United States, the program continues to impact families as new tenants of the legislation are implemented. One such impact is the shared responsibility payment.
If your family doesn’t fit into one of the approved exclusions or exemptions from purchasing insurance through the Federal Marketplace, you will likely be subject to a tax that is known as the “shared responsibility payment.” Individuals and families who did not have official coverage or did not fit into an exemption for 2014 were required to pay this tax when filing their tax returns.
Needless to say, several of our clients in the Evansville area were very surprised to learn that they owed a penalty for 2014. The tax amounted to $95 per adult and $47.50 per child in the household, or up to 1% of the family’s income – whichever was greater. A family with three children and two adults faced a minimum fee of $332.50, assuming their income was less than $33,250.
Will These Payments Increase in the Future?
The tax will increase incrementally in the future. For 2015 taxes, the shared responsibility payment will be $325 per adult and $162.50 per child, up to 2% of your adjusted gross income. For 2016 taxes, it will increase again to $695 per adult and $347.50 per child, up to 2.5% of adjusted gross income.
The shared responsibility payment’s intent is obviously to encourage people to purchase insurance. As ObamaCare tax levels increase, many experts believe that more people will make the decision to buy insurance on the marketplace.
Need Help Navigating ObamaCare Rules?
If you have questions about how your taxes will be affected by ObamaCare, the tax professionals at Baker Retirement & Wealth Management can provide insight and advice. The Baker team has been serving the greater Evansville area for nearly thirty years. With clients in Newburgh, Boonville, Henderson, Rockport, Owensboro, and beyond, we’re ready to serve your needs.
Call 1-866-244-3517 to schedule a consultation today.Talk to a CPA for Free