There Are 19+ Ways to Avoid the Obamacare Tax Penalty. Which Exemption Will You Use?
When you go to file your 2014 taxes, you’ll soon discover a new reporting requirement. You now have to tell the IRS whether or not you had health insurance in 2014. And if you didn’t have health insurance, you’re going to owe a tax penalty.
Depending on your income, this tax penalty could be well over $1,000.
Can you get it out of paying it? Well, yes… under certain circumstances you can. Fortunately, there are enough loopholes written into the law that most people will be able to avoid the Obamacare tax.
Almost none of the uninsured will end up paying the ObamaCare mandate penalty, according to an updated analysis by the Congressional Budget Office, which found that 87% will be able to claim an exemption.
That exemption rate is higher than the CBO had previously thought, which not only blows a hole in its budget forecast for the law, but also increases the odds of an insurance industry “death spiral.”
According to the CBO’s latest estimate, out of the 30 million people who will still be uninsured in 2016, just 4 million will end up paying any tax penalty, despite the law’s requirement that everyone buy government-approved insurance.
Obviously, it’s a good thing for you if you can avoid the tax penalty. You save money. But the more people who avoid the tax, the better. If nobody pays the penalty (or only a few people), then that could be the death knell for Obamacare.
So how do you get an exemption from paying the tax penalty? There are 19 different ways, plus a special “Hardship Exemption” category that provides an additional 14 exemptions.
For example, Christians can get an exemption if they participate in a medical bill-sharing ministry like Medi-Share. Even though medical bill-sharing is not technically health insurance, it provides similar benefits. So members of these services will not have to pay the tax penalty.
Here are a few of the other potential exemptions that could apply to a large number of people:
- You recently experienced the death of a close family member.
- You filed for bankruptcy in the last 6 months.
- You had medical expenses you couldn’t pay in the last 24 months that resulted in substantial debt.
- Your individual insurance plan was cancelled and you believe other Marketplace plans are unaffordable.
- You experienced another hardship in obtaining health insurance.
Pay attention to that last exemption. It’s a general hardship exemption that could apply in many different circumstances. For example, you might qualify for the exemption if you applied for health insurance and were denied. Or you might qualify if you were accepted, but could not afford the premiums. And so on.
Since this is the first year that people are having to pay the Obamacare tax penalty, many tax preparers and CPAs will not be up to speed on all these exemptions. That’s why you must take matters into your own hands. Do the research yourself and do whatever you can to avoid the tax penalty. Hopefully this article will help you do that.
If you want to apply for a hardship exemption, you will need to make sure you check the correct box on your tax return and then submit this form. And if you’re interested, you can see a complete list of hardship exemptions here.
What do you think of the Obamacare penalty tax? Leave a comment below.