Will you have to pay a penalty in 2014 for not having health insurance? Tax penalty explained – Affordable Care Act

The Affordable Care Act will expand coverage to many Americans in several different facets, and 2014 is a critical year for implementation of several mandates within the law. These deadlines have important implications for business and families throughout the country. For real estate professionals, it’s important to understand some of the more complex pieces of the act regarding taxes.  Starting in 2014 new tax penalties can be enforced for those who do not obtain minimal health insurance also known as Essential Benefits (Individual Mandate).

Tax Penalties

To encourage all American’s to pursue and purchase health insurance the Affordable Care Act is going to implement an individual mandate, requiring everyone to obtain healthcare coverage. Those individuals who do not obtain healthcare coverage are required to pay a penalty. This is referred to as a tax for those who do not opt into health insurance exchanges or other healthcare coverage.  If a family does not fall within the federal poverty guidelines, the fee is on a scheduled raise rate per year, beginning with $95 per person in 2014, $325 per person in 2015, and $695 per person in the year 2016. For families, the health insurance tax is generated based on federal poverty guidelines.  To avoid the penalty you should shop for major medical (essential benefits) on the Member Health Insurance Exchange or Government exchange (no added value member insurance benefits will be available on government exchanges).


            In order to understand the varying amounts of the health insurance tax, use an example of a family of four.  A family of four earning less than $30,657 will be eligible for coverage under Medicaid, exempting that family from the health insurance tax.  Based on the chart above, a family of the same size earning between $34,575 and $46,100 per year, opting out of the health insurance exchange coverage will result in a tax capped at 6.3% of the income. In the next income bracket, for families in the $69,150-$92,200 category, the health insurance tax is raised to a cap of 9.5% of income. If a family does not fall within the federal poverty guidelines, the fee is on a scheduled raise rate per year, beginning with $95 per person in 2014, $325 per person in 2015, and $695 per person in the year 2016. Of course, there are a few exemptions for the health insurance tax. Any members of a Native American tribe can receive an exemption as well as any individuals who went without insurance for less than three months during one year.

Businesses also face a tax. Any business with fewer than ten employees (making an average wage of $25,000 or less) does not face any form of a tax penalty. Failing to provide health insurance for a business with a size between 25 and 50 employees, however, results in a health insurance tax of $2000 per person beginning with the 31st employee.

Tax Credits

One of the primary goals of healthcare reform was to enable small businesses to provide affordable healthcare options for their businesses. Effective in 2010, small businesses were empowered with tax credits for their contributions towards employee healthcare plans. This applies to any employer who contributes 50% or more towards employee health costs.

Starting in 2014, individuals and families will be eligible for a tax credit for healthcare coverage purchased through a health insurance exchange. This part of the law is relatively flexible, since it is refundable and can also be paid in advance to the health insurance company to cover premium costs.

Many real estate professionals successfully manage their own businesses with employees or work independently. Either way, it’s important to evaluate the coming tax changes and how they’ll impact you both individually and professionally.

REALTORS Benefits® Program has partnered with SASid (Smart and Simple insurance development) to help NAR member navigate their health insurance options.  SASid’s teams of licensed representatives have helped thousands of members nationally enroll in member insurance programs.  Visit www.Realtorsinsurancemarketplace.com or call toll free:  1-877-267-3752 (M-F 7am to 7pm CST).

Search FAQs

Copyright © 2014 SASid