There has been a lot of confusion around health care reform, or the Affordable Care Act, and what action consumers should take. Under the new law, most Americans will be required to have health insurance in 2014.
If you already have health insurance through your employer, your situation won't change. But for those of you who don't have insurance, you may be wondering -- how will I afford the cost of health insurance or what if I don't buy it at all? I'm here to help you understand if you're eligible for a subsidy (financial assistance from the government), or if you could be facing a tax penalty in the future by choosing to not purchase health care.
What is a health care subsidy and how do I know if I'm eligible?
A health care subsidy is financial assistance from the government to help pay for health insurance if you're eligible. Your eligibility is generally determined by your household income and family size. To see if you're eligible for a subsidy, check out this health care calculator.
How does the subsidy work? The health care subsidy is in the form of a tax credit, but unlike most tax credits, you won't have to wait until you file your taxes to receive it. The subsidy will be applied directly to your insurance premium when you purchase a plan through the online marketplace. Have specific questions about how this impacts you? Get personalized answers to your health care reform questions from the TurboTax AnswerXchange.
How do I apply for a subsidy? You can apply for a subsidy when you purchase health insurance through online federal or state health insurance marketplaces, which opened on October 1st. The names of the online health care marketplaces are different in each state. To look up the name of the Marketplace in your state, click here.
What is a Health Care Reform Tax Penalty?
Because roughly 50 million Americans will need to purchase health insurance for the first time, the government has given families and individuals from October 1, 2013 to March 31, 2014 to purchase health care plans through their state or federal Health Insurance Marketplace. If you don't have insurance by March 31, 2014, you could face a tax penalty on your 2014 taxes (which are filed in 2015). The health care penalty will be prorated based on the number of months you are uninsured and will increase each year; however, there's no penalty for a gap in coverage less than three months.
To help you estimate how much your potential penalty could be for 2014 should you choose to forego the requirement to purchase health insurance, check out the health care penalty calculator below. The health care reform tax penalty is based on your family size and income.
Who isn't required to purchase health insurance? There are some individuals who will not be required to purchase health insurance and therefore will not be penalized, including people with income below the IRS requirements for filing taxes, those who qualify for religious exemptions and members of Indian tribes.
More questions about the health care reform? Be sure to visit the TurboTax blog here.