Health Insurance Tax Penalty: How to Avoid It

December 12, 2016

If you’re tempted to go without health insurance, you should know that you will be subject to a tax penalty.


Part of the Affordable Care Act, or Obamacare, individuals who choose for any reason to not purchase health insurance will be subject to the tax penalty.

However, there is no reason to throw caution to the wind.

The regulation accommodates a number of exemptions to the rule, so you should first investigate purchasing health insurance, calculate your potential tax penalty, and then learn whether or not you’re exempt from the penalty.

What is the tax penalty?

If you hold health insurance through your employer, have Medicare or Medicaid, COBRA or some other form of insurance, you will not be subject to a tax penalty.

When you fill out your tax return, simply check the necessary box to indicate that you were enrolled in a qualified healthcare plan in the previous year.

If you don’t carry insurance that meets the individual mandate, you will have to pay the penalty.

Here’s how it works:

  • The tax penalty is called the “individual shared responsibility payment.”
  • You will owe for yourself, your spouse (if applicable) and any dependents, for any of the months for which you didn’t hold coverage.
  • The penalty is calculated by taking 2.5% of your household income (or a maximum of the national average cost for a Bronze Marketplace plan), or $695 for one adult and $347.50 per child under 18 (or a maximum of $2,085) –  or whichever is higher.


If you’re uninsured and you meet any of these exemptions, you will not be required to pay a tax penalty:

  • You don’t make enough money to be able to afford the lowest-price Marketplace plan or you don’t have to file a tax return.
  • You’ve held qualifying life insurance for nine or more months in the year.
  • You belong to a Native American tribe or religious sect.
  • You are incarcerated.
  • You are an illegal immigrant.
  • You’ve been evicted.
  • You hold a lot of medical debt.
  • You’ve experienced a man-made or natural disaster.
  • You’ve been through a bankruptcy.
  • You’re a domestic violence victim.
  • You’ve had a close family pass away.

Other exemptions exist, aside from the ones listed here.

Get expert help determining if you qualify. At UROne Benefits, we’re happy to help you calculate your tax credit penalty and investigate health insurance options that will meet your needs and your budget.

Give us a call today for more information!