2017 Taxes and Healthcare

The Affordable Care Act (ACA) makes it easier to obtain healthcare for most Americans. There are ups and downs to this coverage, and tax penalties apply for those choosing not to get it.

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How does this affect taxes?

Those choosing to waive health insurance for more than three months have to pay a penalty in most cases. What kinds of penalties? Take a look:

The penalty tax is calculated in two ways: you’re charged based on a percentage of the household AGI, or a flat rate. The catch – whichever amount is greater.

2017 Tax Year

2.5% of your total household adjusted gros income. That equates to $695 per adult, and $347.50 per child under the age of 18, up to the maximum amount of $2,085. Your accountant can provide concrete numbers on how much the penalty actually is.

Are there exemptions to the tax penalty? Absolutely. Here’s a quick breakdown:

  • The most inexpensive coverage is more than 8.13% of your household income
  • You did not have insurance for less than three consecutive months in the year
  • Your income is too low and you don’t have to file a tax return
  • You are Native American or can get health services through the Indian Health Service
  • Religion
  • Participation in a health care sharing ministry
  • You have been overseas for more than a year
  • Hardship (homelessness, bankruptcy, eviction, etc.)


You’ll have to claim that exemption when filing taxes for 2017. These penalties rise every year due to inflation. When paying the fees, there are some distinctions:

  • The percentage method only counts the part of your household income above the yearly tax filing requirement.
  • The per person method only counts the individuals in the home that do not have insurance coverage.
  • Having coverage for part of the year will count for something. You’ll pay 1/12 of the annual amount for each month someone in the home does not have coverage. There is a “short gap” exemption that applies – if you only lapse coverage for one or two months, you won’t incur a fee.

Knowing how to prep for the penalties for not having health insurance will help you avoid sticker shock once the tax return is filed. You can estimate how much you will have to pay by using the IRS tool. Your accountant should also be able to let you know how much you will be paying for not having health insurance.

If you feel you qualify for an exemption, have a conversation with your accountant to see if you can get the fee waived.  There are a number of circumstances that qualify, and a licensed tax professional can guide you much better than assuming you cannot get the exemption.

As the rules continue to change, obtaining health insurance for your own well-being is the best choice. If you cannot afford it, you can definitely avoid taking money you don’t have from your budget. File the necessary paperwork to ensure you aren’t caught in the fray. Get your documentation in order, and prepare to file.

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