Up to this point, 2014 has been a pretty quiet year for tax reform, however, it has been big year for putting into place prior year’s legislation. We know that changes are coming though as many tax breaks expired at the end of 2013 and it is anticipated that some of those will be reinstated, however, it is expected that lawmakers will wait until late in the year to make those decisions.
Health Care Reform has really become part of our everyday language at this point. 2014 has been the year of the individual mandate and basically individuals, and their dependents, whether citizens or legal residents of the U. S., must either have minimum level of health insurance coverage, or pay a tax. The coverage could be under a government sponsored programs such as Medicare, Medicaid, eligible employer-sponsored plans or plans in the individual market. President Obama’s administration did delay the requirement for employers with 50 or more full-time employees.
So what are the penalties for 2014, and how are they imposed? First of all, individuals for whom coverage is too expensive are not subject to the tax. If an individual’s share of the premiums exceed 8% of the household adjusted gross income, they won’t be required to pay the “penalty” or tax. Also, for individuals who do not have employer coverage and therefore, purchasing on the exchange, if the cost of the basic bronze plan, minus any tax credit for buying insurance, exceeds 8% of the household adjusted gross income, they too, will be excluded from the “ penalty” or tax.
For 2014, the tax or “penalty” for not having insurance is either the assigned penalty or an income based fine. The basic penalty is $95 per individual and $47.50 for each dependent under 18 with a maximum of $285 per household. The income based penalty is 1% of the excess of the taxpayer’s household adjusted gross income over the minimum level of adjusted gross income needed to trigger filing a tax return. These amounts are $20,300 for married filing jointly or $10,150 for those filing as a single individual, plus $3,950 per dependent. The tax will be lowered proportionately for each month that the taxpayer has insurance coverage. The penalties will be substantially higher in each subsequent year.
There is a tax credit for lower income individuals to assist them in obtaining and affording insurance coverage. They can have the credit applied to the purchase of insurance when buying through the exchange or, as an alternative, receive the credit on their tax return. Those whom will get the advantage of the credit are those whose household incomes range from $45,960 to $94,200 for a family of four, and $11,490 to $45,960 for singles.
I hope this recap is understandable and helpful, however, I hope you all have medical insurance coverage and this is not relevant to you or your clients, and merely holiday party conversation. ☺ Please let me know if you have any questions.
Happy 4th everyone!!!