Less than 2 weeks are left for 2016 Obamacare Open Enrollment and Americans will face much stiffer tax penalties for not having insurance this year.
In 2016 the penalty is $695 per adult and $347 per child up to a family cap of $2,500 or 2.5% of household income, whichever is greater. This is a large leap over least year’s penalty of $325 for adults, with a $975 maximum or 2% of household income. This is a real penalty that can have a large impact on the bottom line for consumers when they file their tax returns. A recent study from the Kaiser Family Foundation found that the average penalty will balloon from $661 per adult in 2015 to $969 in 2016; a real shock for those that aren’t aware of the new health law’s implications.
According to the IRS, 7.5 million Americans paid a total of $1.5 billion in Obamacare tax penalties on their 2015 returns for failing to have insurance in 2014. That year, the fines assessed were only $95 per adult or 1% of household income (whichever was greater).
As part of the Affordable Care Act, Americans are required to have health insurance. This creates a larger pool of consumers which intends to generate lower health care costs and provides for government “subsidies” to lower income individuals to significantly lower the cost of their insurance.
Paying for health insurance is likely a better option than paying the tax penalty and possibly tens of thousands in medical bills for any accidents that may occur while uninsured. The real question will be if the higher tax penalty will help motive uninsured consumers to enroll in a health plan if they haven’t already.
Open Enrollment ends on January 31, 2016 and Americans can avoid the tax penalty by enrolling in a plan by that date. Extensions are not expected to be offered this year so this deadline is very important to keep in mind.