Medical Insurance Tax Penalties

After the Supreme Court ruling upholding the recent Health Care act, everybody is required to buy health insurance. Or are they?

People who earn less than $9,500 are exempt from the requirement; above those income levels, you would have to pay a tax that depends on your income level. There is a phase-in of rates from 2014 through 2016, but just looking at the 2016 rates, any person with taxable income between $9,500 and $37,000 would have to pay $695 in additional taxes to the IRS.

At higher incomes, the uninsured person would pay 2.5% of taxable income above that $9,500 threshold, meaning somebody with $100,000 of taxable income would have to pay $2,250 in additional taxes, while a taxpayer with $200,000 of AGI would have to pay $4,700 on top of normal tax amounts. Beyond that, the tax would equal the cost of a “bronze” health insurance plan at your state exchange–estimated by the Congressional Budget Office to cost between $4,500 to $5,000 per person, or $12,000 to $12,500 per family.

In other words, the tax equals the cost of health insurance for persons who earn more than $200,000, and is somewhat less costly than the health coverage would be for persons with lower incomes. As a result, we may see taxpayers simply decide to pay the tax rather than buy the (more expensive) coverage.

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5 Responses to Medical Insurance Tax Penalties

  1. Jerry July 16, 2012 at 4:03 pm #

    Rick, perhaps I missed it, or am confused. Does the tax ONLY apply to those who fail to buy health insurance? I have medicare and supplement. Wife has personal Sanford insurance. Thanks…Jerry

  2. Rick July 16, 2012 at 4:05 pm #

    Jerry, Yes,

  3. Alan July 17, 2012 at 2:46 am #

    Rick, how will this affect someone who is covered by a Federal Government covered insurance plan?


  4. Rick Kahler July 17, 2012 at 3:23 am #

    Alan, Federal employees will be unaffected.