The individual mandate provision of the Patient Protection and Affordable Care Act requires that all Americans have a health insurance policy in place by January 1, 2014. Those who are not covered by an employer policy or private plan will have the option of shopping for coverage through an online public exchange, with enrollment beginning on October 1, 2013. While these marketplaces will enable consumers to compare a variety of offerings, many people are still unsure how to get started, whether there are penalties for failing to purchase coverage and how the law will impact their taxes.
Essentially, individuals who fail to buy health insurance will be required to pay a penalty, the amount of which will vary by their income. The fine begins at $95 per person or 1 percent of income in 2014. The penalty will increase to $325 or 2 percent of income in 2015 and eventually rise to $695 per adult or 2.5 percent of income in 2016. in the later years, the amount will be adjusted for inflation.
However, some low- and middle-income individuals may be eligible for tax credits. Beginning in 2014, consumers who make up to 400 percent of the poverty line will be eligible for a subsidy to help them manage the costs of carrying insurance.
High income earners affected by ACA as well
The ACA will also have an impact on high-income earners and the taxes they will incur when the law goes fully into effect. Singles who make more than $200,000 and married couples who bring in $250,000 will be assessed a 0.9 percent Medicare surcharge on their income, in addition to the 1.45 percent they currently pay on wages. In addition, another 3.8 percent tax may be applied to capital gains and dividend investment income.
Lastly, those who have historically qualified for medical expense deductions may need to pay closer attention to their costs in the upcoming year. Currently, individuals may claim the write-off if qualifying health costs exceed 7.5 percent of their adjusted gross income. However, when individuals file their returns for the 2013 tax year, the threshold will increase to 10 percent, which may make it more challenging for many people to qualify.
There are expected to be many questions related to the ACA, so individuals who are unsure how the new law will affect their liabilities should consult with their tax preparer in the near future.