Posted on Nov 01, 2014 by admin
The Affordable Care Act, commonly known as Obamacare, has changed the way millions of Americans receive health care coverage. This sweeping legislation has undoubtedly helped many gain coverage, but there are still several million people without coverage. Beginning in 2014, those who fail to acquire coverage are subject to a tax based penalty under most circumstances. Will your clients be affected by this tax?
According to HealthCare.gov, there is a Minimal Essential Coverage required by the ACA that defines what specific items qualify as adequate health coverage. Some common examples of qualifying coverage include “…individual market policies, job-based coverage, Medicare, Medicaid, CHIP, TRICARE and certain other coverage.”
If your client purchased coverage through a state exchange, HealthCare.gov, or their employer, they have met the minimum coverage amount. Certain older policies also qualify, even if they do not meet newer standards, although this will change in years to come.
If your client did not have coverage during 2014 (Beginning March 31, 2014,) it is likely they will incur a tax penalty. Per return, your client will pay $95 for each adult and $47.50 for each child, up to a maximum of $285 or 1 percent of household income, depending on the level of income.
The Affordable Care Act stipulates that these rates increase each year, meaning that the same client would owe $325 for each uninsured adult in 2015, and $695 for each adult in 2016. Again these are limited to $975/$2085 or 2%/2.5% of income respectively.
Keep in mind that any lapse in coverage lasting fewer than 3 months does not will not incur a tax penalty for your client.
Obamacare may impact your clients taxes in other, more complex ways as well, depending on income level and other factors. National Tax Office is here to help answer all of your tax related questions, and help your business thrive! Becoming a tax pro has never been easier, and there has never been a better time to own your own business. Get in touch with us and get started in no time!