By now most of us know about the penalty for not having Affordable Care Act qualified health insurance for a portion, or all of the year. But what exactly is that penalty, and what will it be in 2017?
In 2016 that maximum penalty is 2.5% of household income per individual (max of the national average annual cost of a Bronze level plan), OR $695 per adult and $347.50 per child (max of $2,085 per family), whichever is greater. The penalty is calculated against the amount of income, either individual or household, that is above and beyond the tax filing threshold. The tax filing threshold for an individual is approximately $10k, and the tax filing threshold for a family is approximately $20k. So, the max penalty for an individual whose Modified Adjusted Gross Income (MAGI) is $50k will be 2.5% of $40k, that individual’s amount of income above and beyond the individual tax filing threshold of $10k. A family whose household income is $5ok will face a max penalty of 2.5% of $30k (per individual in the family), that family’s amount of income above and beyond the family tax filing threshold of $20k.
In 2017, and going forward, the Percentage of Income penalty remains the same, 2.5%. However, the per person penalty of $695 per adult and $347.50 per child will increase every year with inflation. In 2017 that increase will only be 1.1%.