These people might face a surprise health insurance tax this year

Wealth


This year, the IRS will let you slide on a penalty if you didn’t have health insurance in 2019.

Your home state, on the other hand, may not be so forgiving.

The 2019 tax year marks the first time that filers won’t be required to carry qualifying health-care coverage under the Affordable Care Act.

As recently as the 2018 tax year, people who went without coverage were assessed a fee when they filed their federal tax returns. Either they paid $695 per uninsured adult or $347.50 for each child or they were assessed 2.5% of their yearly household income.

More from Personal Finance:
Seniors can’t pay for basics, and Social Security’s not enough
Law took a retirement strategy out of play. How to get around it
What to do about Medicare if you’re almost 65 and working

The Tax Cuts and Jobs Act did away with this penalty, yet a handful of jurisdictions — Massachusetts, New Jersey and Washington, D.C. — have put coverage mandates in place, as well as penalties on your 2019 tax return if you didn’t comply.

Other states are adding coverage mandates for 2020, meaning residents will need to be insured this year or else pay a penalty in 2021. Those states are California and Rhode Island, according to the Kaiser Family Foundation.

Vermont also requires that its residents start carrying insurance in 2020, but has not detailed the penalties for going without.

These states will grant exemptions in a handful of circumstances, including for households whose income falls below the state tax filing threshold.

“The states are reacting; they might want to ensure that they protect their marketplace and health-care systems,” said Andy Phillips, director of the Tax Institute at H&R Block. “They want to make sure people have insurance coverage.”

The cost of going without

Even workplace coverage — wherein employers subsidize part of the premium — is becoming expensive.

While your workplace plan will likely spare you from a state-level penalty, that’s not the case for short-term or “skinny” plans available for individuals.

These states want people to have qualifying health coverage — that is, they must cover a range of services, including prescription drugs, doctors’ services and more.

Comprehensive employer-sponsored plans, coverage purchased on health exchanges, Medicaid and Medicare tend to fit the bill.

“Short-term policies aren’t an issue in these states, in terms of being qualified coverage,” said Jennifer Tolbert, director of state health reform at Kaiser Family Foundation.

Indeed, consumers can’t buy short-term plans in California, New Jersey, Rhode Island and Massachusetts. Meanwhile, Washington, D.C. and Vermont limit short-term plans to only three months.

State penalties

The united states capitol building in Washington dc, USA

Patrick Foto

Here’s a breakdown of what you can expect if you go without coverage in the following states, according to Kaiser.

California: The Golden State has two ways to assess penalties. It can charge a flat amount $695 per adult or $347.50 for each child who goes without insurance, based on your 2020 income tax return. Alternatively, California can charge you 2.5% of gross income in excess of the state’s filing threshold, whichever is higher.

Washington, D.C.: In the nation’s capital, people who were uninsured in 2019 are on the hook for a penalty of $695 per adult or $347.50 per child. Washington can also assess a penalty of 2.5% of household income, whichever is higher. There are exceptions for households experiencing financial hardship.

Massachusetts: Penalties vary based on household income, and can range from $264 per year to $1,524 per year. Individuals with income at or below $18,210 ($37,650 for a family of four) aren’t penalized.

New Jersey: What you pay in the Garden State is based on household size and income. For the 2019 tax year, individual taxpayers without coverage could be on the hook for at least $695 — up to a maximum of $3,012. A family with two adults and three dependents, with income up to $200,000, could pay between $2,085 and $4,500.

Rhode Island: Failure to obtain coverage could lead to one of two penalties: a flat tax of $695 per adult and $347.50 per child, or 2.5% of income above the state filing threshold, whichever is greater.

Vermont: The state requires that all Vermonters have health insurance starting in 2020, but hasn’t yet determined penalty details.

Finally, Maryland will add a box on its tax return which filers can check and find out whether they qualify for Medicaid or subsidized coverage via the insurance exchange. The Old Line State will not levy a penalty on the uninsured.

Gather your documents

The Internal Revenue Services offices in Washington, D.C.

Adam Jeffery | CNBC

As you start preparing for tax season, gather your documents to show you had appropriate coverage.

Taxpayers should watch the mail for a series of forms in the mail (Forms 1095-A, 1095-B and 1095-C) detailing whether you and your family members had coverage throughout the year.

“Employees will get a statement from their employer, as was required under the federal law, indicating they were covered the whole year or part of the year,” said Tolbert. “You’ll want to look out for that info.”



Source link

Products You May Like

Articles You May Like

Home Depot (HD) earnings Q4 2019 top estimates, shares rise
Financial advisors must specialize to survive over next decade: report
Chamath Palihapitiya says billionaires should stop being so sensitive
Best Buy (BBY) Q4 2020 earnings top estimates
SmileDirectClub (SDC) earnings Q4 2019

Leave a Reply

Your email address will not be published. Required fields are marked *