ObamaCare Individual Mandate

ObamaCare’s Individual Mandate: What is the Tax Penalty for Not Having Health Insurance?

ObamaCare’s individual mandate had required most Americans obtain and maintain health insurance, or an exemption, each month or pay a tax penalty. However, the fee has been reduced to $0 on a federal level starting in 2019. That said, some states have their own mandate/fee for 2019 forward.

The national individual mandate, a federal requirement to get coverage or pay a fee created by the Affordable Care Act, used to work like this:

The individual mandate went into effect at the beginning of January 2014 and continued each year. The penalty for not having coverage was paid on your Federal Income Tax Returns for each full month you, or a family member didn’t have health insurance or an exemption and is based on your Modified Adjusted Gross Income (MAGI). Depending on your coverage, income, and family size, you either paid a flat dollar amount or a percentage of income above the tax return filing threshold for your filing status. The fee was capped at the national average for a Bronze health plan available in the marketplace, and it was only paid for full months you or a family member went without coverage.

Although the above applies for 2014 – 2018, starting in 2019 the federal government will not charge a fee for not having health coverage. This means that the federal mandate has effectively been repealed at the federal level starting in 2019.

With that noted, some states are implementing their own state-based mandates and fees. Make sure to check your state’s rules before each year’s open enrollment.

BOTTOMLINE: The Individual Mandate’s fee has been reduced to zero at a federal level starting in 2019. However, 1. the fee may still be owed in some states and, 2. the mandate’s fee was in effect in all states from 2014 – 2018. Thus, you may still have to deal with the fee when filing taxes for the 2018 calendar year in 2019 (or when filing back taxes for 2014 – 2017), but won’t have to deal with the fee for failing to get coverage for 2019 and beyond unless you live in a state that has its own mandate.

FACTThe mandate’s fee was repealed in the 2017 tax bill, but the changes didn’t kick in until 2019

TIP: Did you know a mandate is at the core of many of the world’s universal coverage systems? Learn more about options for universal coverage.

ALL INFORMATION BELOW IS FOR HISTORICAL REFERENCE FOR 2014 – 2018 (although some may generally apply if you live in a state with a mandate for 2019 forward).

What is the ObamaCare Fee for 2016, 2017, and 2018?

The payment for 2016 – 2018 is $695 per adult and $347.50 per child (up to $2,085 for a family), or it’s 2.5% of your household income above the tax return filing threshold for your filing status – whichever is greater.

You’ll owe 1/12 of the total fee for each full month in which a family member went without coverage or an exemption.

The payment has stayed the same since 2016. Meanwhile, the mandate is reduced to $0 for 2019 forward in most states.

Information about the fee is found on the Shared Responsibility Payment Worksheet on form 8965. You’ll need form 8965 to calculate the amount owed and to take exemptions. If you had cost assistance you’ll need to use form 8962. If you had coverage and no cost assistance, you can simply attest to having coverage on your 1040.

Learn how to calculate the Individual Shared Responsibility Payment for your Tax Returns HINT: You’ll use a Worksheet found in the instructions of Form 8965, Health Coverage Exemptions.

ObamaCare Tax PenaltyIMPORTANT: The information below was written for years in which the mandate applies. Keep in mind it won’t apply to health plans for 2019 and beyond.

How to Avoid the ObamaCare Penalty Fee Each Year

To avoid the penalty in years in which the mandate applies, you must either obtain minimum essential coverage during open enrollment and maintain it throughout the year or get an exemption.  You must pay the tax for each full month you go without coverage or an exemption. Even if you only have coverage for one day of a calendar month, it counts as coverage during the month, and you won’t owe the fee for that month. Due to a short coverage gap, you can have less than three consecutive months in a row without coverage each year. Due to a hardship exemption for folks who had trouble signing up for the marketplace, it was less than four months in 2014 if you went without coverage from January to April.

For 2016 you only had two months in which to get coverage during open enrollment without owing the fee, the same will be true moving forward.

If you miss the deadline for open enrollment, you will have to wait until the marketplace opens again to get covered unless you qualify for a special enrollment period.

FACT: You may be exempt from the fee if you are not required to file taxes, don’t have affordable health insurance options, or meet some other criteria discussed further down the page.

What is ObamaCare’s Individual Mandate?

The Individual Mandate is the unofficial name for the requirement to obtain coverage under the Affordable Care Act. That requirement is part of the Affordable Care Act’s Shared Responsibly Provision. The fee in this provision is officially called an Individual Shared Responsibility Payment. See Title I, Subtitle F—Shared Responsibility for Health Care.

The mandate’s concept that all eligible Americans have at least basic health coverage or pay a tax, was originally proposed by the Heritage Foundation in 1989. It was designed as an alternative to the United States setting up a single payer insurance system like those found in Canada, England, Australia, and some other countries.

Individual Mandate Summary

The Shared Responsibility Payment for Not Maintaining Minimum Essential Coverage works like this: if you don’t obtain and maintain minimum essential coverage throughout the year or obtain an exemption, you will have to make a Shared Responsibility Payment for each month you went without coverage or an exemption. If you have coverage for at least one day during the taxable month, then you won’t owe the payment for that month.

We cover ObamaCare’s individual mandate in detail on this page. First, however, here is a quick overview of the individual mandate’s key aspects. Please look over the official IRS website on exemptions and the Individual mandate for additional details.

You Need to Obtain and Maintain Minimum Essential Coverage

The type of coverage you’ll need to avoid the fee is called minimum essential coverage. Minimum essential coverage includes all marketplace insurance, most private major medical plans sold outside the marketplace, Medicare, Medicaid, and CHIP, most employer-based coverage, grandfathered health plans, and more (see below).

Minimum essential coverage must be obtained during that type of plan’s Open Enrollment Period. For private individual and family coverage, the open enrollment period is expected to last from November 15 to February 15 each year. It was scheduled to last from October 1st, 2013 to March 31st, 2014 for ObamaCare’s first enrollment period only.

Short term plans and other non-compliant plans purchased outside of open enrollment don’t comply with ObamaCare’s individual mandate! In most cases, you can only obtain private insurance that counts as minimum essential coverage during each year’s open enrollment because insurers are unofficially adopting marketplace enrollment periods.

To comply with the mandate, you’ll need to not only obtain coverage, but also to maintain it throughout the year unless you qualify for an exemption. Some exemptions only last a few months; others last for the full calendar year. You’ll owe the fee for any month you go without coverage or an exemption past the “less than three months” short coverage gap period.

Coverage Gap Exemptions and Deadlines for ObamaCare Individual Mandate

Although the mandate started January 1st, 2014, you have a consecutive grace period each year of fewer than three months due to a “short coverage gap” exemption.  This exemption allows you fewer than 3 consecutive months without coverage each year. This coverage gap exemption only applies if you obtain coverage – not if you go without coverage for a full year. (As mentioned above, a special hardship exemption is granted for 2014 to those who got marketplace coverage that started as late as May 1st.) Make sure to report exemptions; if you had at least one full month without coverage, you would need to fill out Form 8965, Health Coverage Exemptions and attach it to your 1040.

Other Individual Mandate Exemptions

Many Americans will be able to avoid the fee by applying for an exemption. Even if you obtain an exemption, you may still find affordable coverage options through Medicaid, catastrophic coverage, or the Marketplace.

You must apply for most exemptions. This takes time and proof in some cases, so don’t wait. Here are some common exemptions — see our full list of ObamaCare exemptions for more.

  • If you don’t have to file taxes because your income is below the filing limit, you qualify for an exemption.
  • If the cheapest plan available to you costs more than 8% of your income, you qualify for an exemption.
  • If you applied to Medicaid and got rejected in a state that rejected Medicaid expansion, you qualify for an exemption.
  • If you had your plan canceled in 2014 due to the Affordable Care Act, you qualify for a hardship exemption for 2014.
  • You are allowed less than three months in a row without coverage. Having coverage for at least one day in a month counts as coverage. So you could miss two full months and then have one day of coverage in the third month and still avoid the fee for all three months.
  • If you went without coverage from January to April 2014, and then obtained and maintained marketplace coverage, you are exempt from those months.

According to the CBO: Almost 90% of the 30-plus million Americans without insurance will not pay the penalty for not having insurance in 2016 due, for the most part, to the number of exemptions.

Basics of How the ObamaCare Tax is Calculated

The ObamaCare fee for not having health insurance, for each month you go without coverage, is either a flat dollar amount or a percentage of income above the tax-filing threshold. This fee increases every year.

The ObamaCare fee is based on income and family size, and it uses household income (MAGI). The fee is first calculated as an annual fee, and then it’s divided by 12 and applied to each calendar month you or a family member went without coverage or an exemption. That amount is then capped in one of two ways (see below), so no one will have to make a payment of more than it would have cost to get basic coverage. As long as you had coverage during the calendar year, you automatically qualify for a “less than three month” short coverage gap exemption that exempts less than three months in a row.

You can use this ObamaCare Fee Calculator from the TaxPolicyCenter.Org to get a quick estimate on your total annual fee for 2014 – 2016. However, we strongly suggest that you look at our line-by-line breakdown of how to calculate the fee below. Remember, you’ll still need to understand exemptions, tips and tricks, and how that fee applies per month, so please read the rest of the information on this page as well.

You will find basic fee amounts below — see our page on calculating the Shared Responsibility Payment for a simplified walkthrough.

How Much is the Penalty Fee for Not Having Insurance?

Shared Responsibility Payment for 2014 – If you Went Without Coverage in 2014

The annual fee for not having insurance in 2014 was $95 per adult and $47.50 per child (up to $285 for a family), or was 1% of your household income above the tax return filing threshold for your filing status – whichever is greater.  You’ll pay 1/12 of the total fee for each full month in which a family member went without coverage or an exemption.

Shared Responsibility Payment for 2015 – If you Go Without Coverage in 2015

The annual fee for not having insurance in 2015 was $325 per adult and $162.50 per child (up to $975 for a family), or was 2% of your household income above the tax return filing threshold for your filing status – whichever is greater. You’ll pay 1/12 of the total fee for each full month in which a family member went without coverage or an exemption.

Shared Responsibility Payment for 2016 – If you Go Without Coverage in 2016

The annual fee for not having insurance in 2016 is $695 per adult and $347.50 per child (up to $2,085 for a family), or it’s 2.5% of your household income above the tax return filing threshold for your filing status – whichever is greater. You’ll pay 1/12 of the total fee for each full month in which a family member went without coverage or an exemption.

Shared Responsibility Payment Moving Forward

The annual fee for not having insurance for 2017 forward (until further notice) is $695 per adult and $347.50 per child (up to $2,085 for a family), or it’s 2.5% of your household income above the tax return filing threshold for your filing status – whichever is greater. You’ll pay 1/12 of the total fee for each full month in which a family member went without coverage or an exemption.

The fee has stayed the same since 2017. We will update this page if the fee changes moving forward.

Important Notes on the Shared Responsibility Payment

  • The fee for not having insurance increases each year.
  • You have to make a payment for every household member that you claim as a dependent.
  • If you owe the flat amount, you won’t pay more than the maximum for a family (up to $285 in 2014). If you owe the percentage, you will need to make one payment for the family – not a percentage for each member. That amount is capped at the national average for a bronze plan.
  • As long as you had coverage each year, you can deduct less than three consecutive months from the fee, per family member, due to a “short coverage gap” exemption. In 2014, if you went without coverage in April, you are exempt from this month as well due to a hardship exemption for folks who had trouble enrolling in the Marketplace.
  • When trying to figure out if you’ll pay the percentage or the flat dollar amount, don’t forget to subtract income below the tax return filing threshold. If you don’t do that, you’ll end up overpaying.
  • Regardless of how you pay the tax, the maximum penalty cannot exceed the national average yearly premium for a bronze plan. See below for national average yearly premiums of bronze plans to find out the maximum ObamaCare fee for not having coverage.
  • The tax is based on MAGI or household income; that’s adjusted gross income from your tax return plus any excludable foreign earned income and tax-exempt interest you receive during the taxable year. Household income also includes the incomes of all of your dependents that are required to file tax returns.

IMPORTANT: See the “How the ObamaCare Tax Penalty Works” section below for details. The specifics of the law and fee calculations can be a little complicated. Below you’ll find some tips and examples to help you further understand the Shared Responsibility Payment.

Reporting the Fee to the IRS

To report the fee to the IRS, you’ll fill out the amount you owe on line 61 of your 1040. There is no Shared Responsibility Form. The amount is derived from the Shared Responsibility Payment Worksheet, found on Page 5 of the instructions for IRS form 8965 (a screenshot is also provided in the calculation section below).  See our how to file taxes for ObamaCare for more details on filing the fee and other ACA-related taxes.

minimum essential coverage

The following video explains the Individual Mandate tax penalty:

How the ObamaCare Tax Penalty Works

Above we covered all the main points, below we take a more detailed look at the fee.

The fee depends on your income, family size, and history of coverage; figuring out the exact amount you owe can be a little confusing at first.

This information below will help you to understand what you owe and will help you to avoid overpaying because of misunderstanding maximum fee amounts based on the national average of Bronze plans.

Your tax penalty (Individual Shared Responsibility Fee) for not having insurance is paid with your federal income taxes at the end of the year. If your taxable income is below the filing threshold, you are exempt from this tax.

• The percent of your household income used to calculate the fee is the amount above the tax return filing threshold for your filing status. So, for example, a single person under 65 would subtract $10,150 for 2014 before calculating the fee.

• The fee is annual, so if you’re uninsured for just part of the year, 1/12 of the yearly penalty applies to each month you don’t have insurance or an exemption.

• In general, when figuring everything out, from what you owe to maximum fees, it’s all divided by 12 since you’ll be calculating by the months (the IRS form requires you report for each month – not just the year as a whole).

• Every household member claimed on your tax return will owe a fee for each month they went without coverage. If you pay the flat fee, this is easy to figure out as the dollar amounts are presented. If you pay the percentage, it works a little differently. The percentage fee applies to the whole family. In other words, you won’t pay 1% per family member in 2014 – you’ll simply pay 1% of household income after the filing threshold. (see examples below)

• The penalty is based on your family’s modified adjusted gross income (MAGI) and is paid on your federal income taxes. This is often called household income.

• The maximum penalty per family is capped at no more than 300% of the minimum penalty (e.g. in 2016, $695 x 300% = $2,085). This only applies to the flat dollar amount. The percentage is capped at the average premium cost of a bronze plan.

• The total penalty for the taxable year cannot exceed the national average of the annual premiums of a bronze-level health insurance plan offered through the health insurance marketplaces. For 2014, the annual national average premium for a bronze level health plan available through the Marketplace is $2,448 per individual ($204 per month per individual), but $12,240 for a family with five or more members ($1,020 per month for a family with five or more members). For a detailed explanation of how the average bronze plan premium is calculated, see IRS Internal Revenue Bulletin: 2014-33 or see Rev. Proc. 2014-46.

The Average Price of a Bronze Level Health Plan for 2014 – 2016:

2014:        $2,448
2015:        $2,570
2016:        $2,699

• If only part of the family went without coverage for a month, only those family members are used to calculate a maximum payment based on a bronze plan. So, if only one adult in a family of five goes without coverage in a four person house, the max penalty is $2,448 and not $12,240.

• Children under 18 are assessed at 50% of the minimum penalty.

• The penalty is pro-rated for the number of months you were without health insurance, but there is no penalty for a single gap in coverage of fewer than 3 months during each year.

• Health insurance plans will provide proof of coverage for their customers – so as long as they have health insurance – in the form of a 1095 A, 1095 B, or 1095 C. NOTE: These are sent to you at the end of each year from your insurer. If you had more than one insurer during the year, you should receive one from each.

individual mandate

How Do I Pay the ObamaCare Fee?

When you file your taxes, you’ll calculate your Individual Shared Responsibility payment for each month you or a dependent went without coverage. Your insurer will send you a 1095-A, 1095-B, or 1095-C form that will show what months you had coverage and how much assistance you got. If you had an exemption for any months, you might need an ECN number provided by your state’s Health Insurance Marketplace. You’ll use this information to complete a worksheet (see example above). Learn how to file your taxes for the ObamaCare fee.

You can see our detailed breakdown and step-to-step guide to calculating the Shared Responsibility Payment here.

What Happens If I Don’t Pay the Individual Mandate Fee?

The only way for the IRS to collect the fee for not having health insurance, if you choose not to pay it, is for them to withhold the money from the Federal Income Tax Refund you would get back from the IRS after filing your income tax return. The IRS cannot enforce the Individual Shared Responsibility provision with jail time, liens, or any other typical methods of collection.

Individual Mandate Facts

Including the information above, there are a few things that every American should know about ObamaCare’s individual mandate:

• You need to enroll in minimum essential coverage during open enrollment period each year if you want to avoid the per-month fee for not having coverage.

• The fee is based on of the number of months in a given year an individual is without “minimal essential coverage” or an exemption.

• If buying the cheapest plan on the health insurance marketplace would cost you more than 8% of your household income after subsidies (adjusted each year), you are exempt from the mandate.

• If your employer-based coverage costs more than 9.5% of employee-only income (adjusted each year), you can use the marketplace to shop for a plan.

• You are exempt from the mandate if employer-based coverage that is considered affordable for the employee costs more than 8% of your household income for a dependent.

• You are allowed a short coverage gap of less than 3 consecutive months within a year and will be exempt from the fee for these months.

• Most employer-based coverage, Medicare, Medicaid, CHIP, private insurance, and insurance purchased through your State’s marketplace are considered minimal essential coverage.

• The requirement to obtain health coverage is the trade Americans make for our new benefits, rights, and protections including the requirement for insurers to cover anyone regardless of pre-existing conditions and gender.

• Those who choose to pay the tax help to subsidize the cost of health insurance purchased through the health insurance marketplace.

• ObamaCare makes insurance more affordable. Americans making less than 400% of the federal poverty level may be able to obtain free or low-cost health insurance from their State’s Health Insurance Marketplace.

• The Supreme Court officially declared the ”mandate” to have insurance was a tax on June 28, 2012.

• The Individual Mandate’s fee is technically called the “Individual Shared Responsibility Fee.”

• The Individual Mandate and Employer Mandate are part of the “Shared Responsibility Provision,” one of the key provisions contained in the Affordable Care Act.

The mandate to have insurance is sometimes referred to as the ObamaCare tax penalty, the Individual Mandate, or the Individual Shared Responsibility Fee. These are all the same thing. If you are looking for information on the Employer Shared Responsibility Fee (the one in which employers have to cover full-time workers), please see our Employer Mandate page.

The Shared Responsibility Provision

The Individual Mandate is officially called the “Individual Shared Responsibility Fee,” and it’s part of something called the “Individual Shared Responsibility Provision.” Here is the official definition of the provision:

The federal government, state governments, insurers, employers, and individuals are given shared responsibility to reform and improve the availability, quality, and affordability of health insurance coverage in the United States. Starting in 2014, the Individual Shared Responsibility Provision calls for each person to have minimum essential health coverage (also known as minimum essential coverage) for each month, qualify for an exemption, or make a payment when filing his or her federal income tax return.

Do you want more information on the Penalty? Look at the official IRS page.

What is Minimum Essential Coverage?

To avoid the mandate, you’ll have to obtain “minimum essential coverage.” This includes all Government and job-based insurance as well as most private insurance. As a rule of thumb, if you have insurance already, you don’t have to worry about the mandate.

Minimum essential coverage includes the following:

  • Employer-sponsored coverage (including COBRA coverage and retiree coverage)
  • Coverage purchased in the insurance market including a qualified health plan offered through the Health Insurance Marketplace (also known as the Affordable Insurance Exchange)
  • Medicare Part A coverage and Medicare Advantage plans
  • Most Medicaid coverage
  • Children’s Health Insurance Program (CHIP) coverage
  • Certain types of veterans health coverage administered by the Veterans Administration
  • Coverage provided to Peace Corps volunteers
  • Coverage under the Non-appropriated Fund Health Benefit Program
  • Refugee Medical Assistance supported by the Administration for Children and Families
  • Self-funded health coverage offered to students by universities for plan or policy years that begin on or before Dec. 31, 2014. For later plan or policy years, sponsors of these programs may apply to Health and Human Services (HHS) to be recognized as minimum essential coverage.
  • State high-risk pools for plan or policy years that begin on or before Dec. 31, 2014.  For later plan or policy years, sponsors of these programs may apply to Health and Human Services (HHS) to be recognized as minimum essential coverage.

What Doesn’t Count as Minimum Essential Coverage?

Minimum essential coverage does not include coverage providing only limited benefits, such as coverage for only vision or dental care, or Medicaid that covers only certain benefits (e.g. family planning, workers’ compensation, or disability policies).

Most insurance types offered between each year’s open enrollment will be short term health insurance, fixed benefit plans and supplemental insurance. They will not help you avoid the fee on their own, but they will help you be covered health-wise.

Are you unsure if your plan will help you avoid the fee?  Ask your insurer whether or not your plan is “ACA compliant” or counts as “minimum essential coverage.”

Learn more about Minimum Essential Coverage here.

Subsidized Insurance: ObamaCare Subsidies

For many Americans, the best way to avoid the fee will be to buy health insurance through their State’s marketplace using ObamaCare Subsidies. Subsidies are only offered through the marketplace. They help reduce premium costs and lower out-of-pocket expenses. ObamaCare’s subsidies are available to people with incomes between 100% – 400% of the FPL (Federal Poverty Level). Those making less than 138% FPL might qualify for Medicaid if their state expanded Medicaid.

NOTE: If your state has not expanded Medicaid, you qualify for an exemption, but only if you first apply for Medicaid in your state and are denied coverage.

The current 138% FPL, which changes each year, is $16,105 for an individual and $32,913 for a family of four.  Some will qualify for an exemption from the fee and will still be eligible for cost assistance subsidies.

Nearly 26 million Americans may be eligible for subsidies to buy health insurance under ObamaCare. Find out how to apply for the Health Insurance Premium Tax Credits for cost-assistance on the ObamaCare Health Insurance Marketplace using our Health Insurance Marketplace Guide.

The Latest Date You Can Sign up for ObamaCare

You need to either sign up for ObamaCare before the end of open enrollment each year or qualify for an extension or exemption.

If you enrolled in a health insurance plan through the Marketplace before the end of open enrollment, you won’t have to pay the fee for any month before your coverage began. Moving forward, you must obtain coverage during open enrollment to avoid the fee.

Marketplace coverage always starts on the first day of a month. To qualify, you must have enrolled by the 15th day of the previous month.

If you missed open enrollment, you would need to wait until the next enrollment period to use the marketplace or qualify for special enrollment. Find out more about open enrollment.

Find your state’s Health Insurance Marketplace.

More Information on the ObamaCare Tax Penalty For Businesses

See our ObamaCare Employer Mandate page for more information on the Employer Shared Responsibility Fee for employers with more than 50 full-time equivalent employees. Those with less than 25 full-time equivalent employees can qualify for tax subsidies of up to 50% of their cost towards employees’ premiums.

ObamaCare Exemption: How to Avoid the ObamaCare Tax Penalty

Those who have insurance through their employment or currently have an insurance plan have nothing to worry about when it comes to the tax penalty. Those on Medicare or Medicaid are also exempt. If your state did not expand Medicaid, you are exempt. If the only coverage available to you is unaffordable, which is defined as being more than 8% your taxable income, you are exempt. Overall, around 26 million Americans will be exempt from the tax penalty. Many exemptions require you to apply for an exemption and provide documentation.

If you belong to any of the groups below, you are exempt from ObamaCare’s mandate to “obtain minimum essential coverage” (i.e. buy insurance), and you will not have to pay the fee:

Unaffordable Coverage Options- People who would have to pay more than 8% percent of their household income for health insurance.

No Filing Requirement- People with incomes below the threshold required for filing taxes (in 2012, $9,750 for a single person and $27,100 for a married couple with two children). This exemption is automatic for those who qualify.

Hardship Exemption- The Health Insurance Marketplace, also known as the Affordable Insurance Exchange, has certified that you have suffered a hardship that makes you unable to obtain coverage. There are many conditions that would qualify you for a hardship exemption, such as being denied Medicaid because your state did not expand Medicaid. See our Exemptions page for a full list of Hardship Exemptions.

Short Coverage Gap Exemption- If you go without coverage for less than three consecutive months during the year, you will not be responsible for the fee for those months. You need a plan that starts by April 1st, 2015, to avoid the per-month fee in 2015. You needed a plan that started by May 1st, 2014, to avoid the per-month fee on your 2014 Federal Income Tax Return. You are allowed one coverage gap of three months or less per year.

NOTE: There was another coverage gap exemption that applied to those who purchased marketplace insurance between March 15th and April 15th, 2014 (that coverage didn’t start until May 1st, 2014).

ObamaCare Exemption: How to Apply for an Exemption

ObamaCare exemptions (i.e. getting an exemption from the Affordable Care Act’s Individual Shared Responsibility Fee) for unaffordable coverage, short coverage gaps, or certain “hardships” that can be claimed only by filing a federal income tax return.  Applying for an extension, however, is not a part of your standard federal income tax return. Certain exemptions are automatic. For example, those under the federal income tax return filing threshold are exempt because they do not file for taxes.

If you belong to any of the groups below, you are exempt from ObamaCare’s mandate to “obtain minimum essential coverage” (i.e. buy insurance), and you will not have to pay the fee.

• Religious Conscience- People who qualify for religious exemptions. The Social Security Administration administers the process for recognizing these sects according to the criteria in the law.

• Health Care Sharing Ministry- You are exempt if you are a member of a recognized health care sharing ministry.

• Not Lawfully Present- Undocumented immigrants; You are not a U.S. citizen, a U.S. national, or an alien lawfully present in the U.S., so you are exempt from this ruling.

• Incarceration- People who are incarcerated are exempt.

• Indian Tribes- Members of a federally recognized Indian tribe are also exempt.

The tax will be unavoidable for those who can afford it and choose not to purchase health insurance. The money collected from these taxes goes towards funding ObamaCare’s Marketplace Subsidies and subsidizing hospitals to cover unpaid emergency room visits. The money is also a down payment on your almost inevitable use of the health care system.

Check out the official IRS website on exemptions and the Individual Mandate for additional details.

Hardship Exemption Update December 20th, 2013: If you had your plan canceled in 2014 due to the Affordable Care Act, you probably qualified for a Hardship Exemption in 2014. That means you didn’t have to pay the fee if you decided to go without insurance. You also qualified to purchase a low premium and high out-of-pocket Catastrophic Plan from Private Health Insurance Providers outside the Marketplace. This change does not affect your ability to get subsidies or purchase other marketplace plans.

For more details on exemptions go to our ObamaCare exemptions page.

You need to apply at Healthcare.gov for an exemption. If you qualify, you will receive an Exemption Certificate Number (ECN) that you use to get the exemption from the fee on your Federal Tax Return. Processing Exemptions takes time, so don’t wait. Please see our Exemptions page for a full list of exemptions and the required documentation to apply for them. Then go to Healthcare.gov to apply.

NOTE: If you qualify for an exemption, you will probably also qualify to shop around for a Catastrophic Plan from Private Insurance Companies.

ObamaCare Sign-up Date Exemptions Explained

Although the law says you needed insurance by February 15th, 2015, you technically have a 3-month “Short Coverage Gap Exemption.” This will allow you less than 3 consecutive months without coverage in 2015 before being responsible for the fee for not having insurance.

What If My Plan Started After May 1st, 2014, Did I Owe the Fee on my 2014 Federal Tax Return?

If your plan started after May 1st, 2014, or you didn’t get minimum essential coverage, you do owe the fee for each month you went without minimum essential coverage unless you received an exemption. Some people qualified for a special enrollment period each year due to life circumstances, so if you did obtain coverage during open enrollment or lose your coverage outside of open enrollment, please check and see if you qualify for a special enrollment period.

What if I Have a Coverage Gap of Three Consecutive Months or More?

If you got marketplace coverage starting after open enrollment, you may not qualify for the Short Coverage Gap Exemption and might owe the Shared Responsibility Fee for each month without coverage. Although the IRS proposals on the mandate allow you to count only one coverage gap per year (in case you have more than one), it doesn’t specifically say what happens if those gaps are not consecutive (separated by periods of being enrolled in a plan). To be safe, we strongly suggest getting and maintaining coverage throughout the year and complying with the law as written. Relying on last-minute exemptions, updates, and rulings may backfire or delay your Federal Income Tax Refund. It’s better to be safe than sorry. We will be researching this issue and updating everyone with details.

Can I Buy Insurance for my Children and Pay the Tax for Myself?

You can get coverage for any or all of your dependents, but you will still be responsible for the tax penalty for yourself. If getting coverage for yourself (in addition to your children) is too expensive, you may qualify for an exemption from the fee. You might also qualify to shop for Catastrophic coverage for yourself. You should see if your children are eligible for CHIP before assuming that the entire family will be insufficiently covered by health insurance.

Individual Mandate: Why Do I Need to Buy Health Insurance?

On a personal level, we are of the opinion that you should get health insurance if you can afford it. It’s important to remember that healthcare costs more without coverage. Not only does coverage protect you in an emergency, but it also lets you pay insurer rates for care. With all the options for low-cost coverage and new benefits included in every plan, it’s hard to argue that paying the fee is a better option. The fee increases every year, so going without coverage becomes more costly with each passing year.

On a national level, the Individual Mandate and Employer Mandate are what allow ObamaCare work. The requirement to obtain insurance and to “share the financial responsibility” is the trade we all make to provide minimum essential benefits, subsidies for coverage, and rights and protections provided for under The Affordable Care Act for the most of us.

ObamaCare offers benefits, rights, and protections to all Americans in regards to their health care. These benefits, rights, and protections include the following.

  • The mandate for health insurance companies to cover everyone regardless of pre-existing conditions, which half of Americans have.
  • Rules now prevent insurers from charging women more than men.
  • A ban on dropping coverage for any reason aside from fraud.
  • Mandates that an insurer cover stated essential health benefits.
  • Wellness visits and preventative services with no out-of-pocket costs.
  • General increases in the overall quality of your care.

The only way health insurance providers can afford all of this is if everyone buys insurance or pays the tax. If everyone waited until they got sick to obtain coverage, then health insurance companies couldn’t afford to provide insurance, and everyone’s premium rates would become unaffordable. If everyone only used emergency services which are paid for by tax dollars, then all taxpayers would have financial difficulty. Also, many chronic conditions need an individual doctor to treat them, not a series of ER visits.

Anyone can have an accident, and most people will use health-related services at some point. Just like car insurance, you have to have it to cover the “what if” scenario. Of course, insurance also helps to promote wellness and prevention.  In theory, a healthier population in the present will curb treatment costs of sick Americans in the future.

Remember, if you are one of the millions of Americans without health insurance, apply for your State’s health insurance marketplace during your next open enrollment period. See if you qualify for free or low-cost coverage and avoid paying ObamaCare’s individual mandate fee.


ObamaCare Tax Penalty: The Individual Mandate

Author: Thomas DeMichele

Thomas DeMichele is the head writer and founder of ObamaCareFacts.com, FactsOnMedicare.com, and other websites. He has been in the health insurance and healthcare information field since 2012. ObamaCareFacts.com is a...

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