ObamaCare Exemption: How to Avoid the ObamaCare Tax Penalty

19 Jan

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Those who have insurance through work or currently do not have insurance obviously have nothing to worry about when it comes to the tax penalty. Those on Medicare or Medicaid will also be exempt. Aside from this Americans below the %133 FPL threshold will be exempt as well. Overall around 26 million Americans will be exempt from the tax penalty.

If you belong to any of the groups listed below you are exempt from ObamaCare’s mandate to “obtain minimum essential coverage” (i.e. buy insurance):

• Unaffordable coverage options Exemption. 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)

• Hardship. 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.

• Short Coverage Gap Exemption. If go without coverage for less than three consecutive months during the year you will not be responsible for the fee for those months. Make sure to sign up for a plan that starts by April 1st, 2014 to avoid the per month fee in 2014. Open enrollment ends March 31st, but if you sign up after March 15th your coverage won’t start until May 1st, 2014 and you may be responsible for the fee for going without health coverage in April.

• 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 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.

• Incarceration. People who are incarcerated.

• Indian tribes. Members of a federally recognized Indian tribe.

For those who can afford it and choose not to purchase health insurance the tax will be unavoidable. The money collected from these taxes goes towards funding ObamaCare and subsidizing hospitals who will have 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 now qualify for a hardship exemption in 2014. That means you won’t have to pay the fee if you decide to go without insurance and will qualify for a low premium, high out-of-pocket catastrophic plan on your State’s health insurance marketplace. This change does not affect your ability to get subsidies or purchase other marketplace plans.

ObamaCare Exemption: How to Apply for an Exemption

ObamaCare exemptions (i.e. getting an exemption from the Affordable Care Acts individual shared responsibility fee) for unaffordable coverage, short coverage gaps, certain hardships and individuals who are not lawfully present in the United States can be claimed only as part of filing a federal income tax return. The exemption for those under the federal income tax return filing threshold is available automatically. No special action is needed. For other exemptions you’ll need to claim exemption on your income taxes and/or apply for a exemption certificate through the marketplace.

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 you would get back from the IRS after filing your income tax returns. The IRS cannot enforce the Individual Shared Responsibility provision with jail time, liens, or any other of typical methods of collection.

What is Minimum Essential Coverage?

In order to avoid the mandate you’ll have to obtain “minimum essential coverage”. Basically this includes all Government and job based insurance and 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 individual market, including a qualified health plan offered by the Health Insurance Marketplace (also known as an 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
•TRICARE
•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 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 program may apply to HHS to be recognized as minimum essential coverage)

Minimum essential coverage does not include coverage providing only limited benefits, such as coverage only for vision care or dental care, and Medicaid covering only certain benefits such as family planning, workers’ compensation, or disability policies.

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

You can get coverage for any of all of your dependents but you will still be responsible for the tax penalty for yourself

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