What is the 2017 penalty for not having health insurance?

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Understanding the 2017 Penalty for Not Having Health Insurance

If you live in the United States and don't have health insurance, you may be subject to a penalty under the Affordable Care Act (ACA), also known as Obamacare. The penalty, which is calculated based on your income and family size, is intended to encourage people to obtain coverage and help stabilize the health insurance market. However, the penalty has been controversial and its future is uncertain under the current political climate. In this article, we will explain what the 2017 penalty for not having health insurance is, how it works, and what you can do to avoid or minimize it.

The Basics of the Penalty

For the tax year 2017, the penalty for not having health insurance is the greater of:

- 2.5% of your household income above the federal tax filing threshold (which is $10,400 for single filers, $20,800 for married filers, and $24,000 for those who are married but file separately), or

- $695 per adult and $347.50 per child under 18, up to a maximum of $2,085 per family.

The penalty is prorated based on the number of months you or your dependents were uninsured, with no penalty for the first three months. For example, if your household income is $50,000 and you were uninsured for the whole year, your penalty would be $1,250 (2.5% of $39,600, which is $50,000 minus $10,400). If you were uninsured for only six months, your penalty would be $625 (half of $1,250).

The penalty is assessed and collected by the Internal Revenue Service (IRS) when you file your federal income tax return. You can claim exemptions from the penalty if you meet certain criteria, such as:

- You are uninsured for less than three consecutive months of the year.

- You have a gap in coverage of no more than two consecutive months.

- You cannot afford coverage because the cheapest available plan would cost more than 8.16% of your household income.

- You belong to a recognized religious sect that opposes insurance.

- You are a member of a recognized health care sharing ministry.

- You are incarcerated.

If you qualify for an exemption, you will need to report it on your tax return and provide supporting documentation if required.

The Pros and Cons of the Penalty

Proponents of the penalty argue that it helps spread the cost of health care more fairly across the population, as those who are healthy and choose not to buy insurance still benefit from emergency care and other services that are paid for by others. They also point out that the penalty is lower than the cost of most health insurance plans, especially for young and healthy individuals, and that subsidies and tax credits are available to many people to offset the cost of coverage.

Opponents of the penalty contend that it is a government overreach and a burden on individual freedom and choice. They argue that the penalty unfairly targets low-income and middle-class families who may struggle to afford insurance or face high deductibles and copays even if they have coverage. They also claim that the penalty has failed to increase the number of people enrolled in insurance, as some people would rather pay the penalty than buy insurance they don't want or need.

The Future of the Penalty

The fate of the penalty is uncertain under the current political climate, as the Trump administration and the Republican-led Congress have vowed to repeal and replace the ACA. While several proposals have been put forth, none has been enacted yet, and the timeline and scope of any changes is unclear. If the ACA is repealed without a replacement, the penalty would likely be eliminated, but the consequences for the health insurance market and the uninsured population would be significant.

What You Can Do

Whether or not you agree with the penalty, it is important to understand how it works and how it affects your finances and health. Here are some tips to help you navigate the complex world of health insurance and taxes:

- Shop around for health insurance plans that fit your needs and budget, and compare the benefits and costs carefully before you enroll.

- Take advantage of subsidies and tax credits if you qualify, as they can significantly reduce your out-of-pocket expenses.

- Consider alternative forms of coverage, such as short-term health insurance, health care sharing ministries, or catastrophic plans, if they meet your needs and are allowed in your state.

- Talk to a licensed insurance agent or broker who can help you understand your options and guide you through the enrollment process.

- Review your tax return and health insurance status regularly to avoid surprises and penalties, and seek professional advice if you have any questions or concerns.

Conclusion

The 2017 penalty for not having health insurance is one of the most controversial and debated aspects of the ACA. While it may not affect everyone, it can have significant financial and legal consequences for those who are uninsured or underinsured. By understanding how the penalty works, what exemptions are available, and what your options are for health insurance and taxes, you can make informed decisions that protect your health and wealth. Remember, health insurance is not just a matter of compliance, but also a vital tool for managing risk and securing your future.