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How to Calculate Your 2016 Obamacare Tax Credit

How to Calculate Your 2016 Obamacare Tax Credit

Posted Jun 16, 2015 by Author

Calculate your health insurance cost now

As of Jan. 1, 2014, the Affordable Care Act requires that most Americans buy health insurance or face a tax penalty. Those who purchase health insurance coverage through the state-based and federally facilitated exchanges that make up the Health Insurance Marketplace may be eligible for tax credits that help lower monthly premiums.

Premium tax credits are available only to those who are not eligible for affordable coverage from other sources and whose incomes fall within two to four times the federal poverty level. During 2015 open enrollment, 87 percent of those who purchased health insurance coverage through HealthCare.gov chose plans with financial assistance.1
Use the healthedeals.com Health Care Reform Calculator to estimate your annual health insurance premium and tax credit. Note: This credit is only available when you purchase health insurance coverage from a state-based or federally facilitated exchange.

The individual shared responsibility payment

Those who go without health insurance and do not qualify for an exemption may owe a penalty known as the shared responsibility payment when filing their federal income taxes.

If you go without coverage in 2015, the individual shared responsibility payment is the greater of2:

  • 2 percent of your household income that is above the tax return threshold for your filing status, such as married filing jointly or single, or
  • Your family’s flat dollar amount, which is $325 per adult and $162.50 per child under 18, with a maximum penalty per family being $975.

The penalty is capped at the cost of the national average premium for a bronze level health insurance plan purchased through the state-based and federally facilitated exchanges.3

In 2016, this penalty will increase as follows:

  • 2.5 percent of your household income that is above the tax return threshold for your filing status, or
  • Your family’s flat dollar amount, which is $695 per adult and $347.50 per child under 18.

Each year after 2016, the shared responsibility payment will increase with inflation. Exemptions apply to certain populations, such as those with brief coverage gaps, those who cannot afford coverage, members of federally recognized Indian tribes and members of recognized religious groups that object to certain benefits.

Calculation tools

With the arrival of 2014 and the first Obamacare open enrollment, many tax credit calculators appeared. These online tools can help you understand the Affordable Care Act from a personalized, dollars-and-cents perspective.

The healthedeals.com Health Care Reform Calculator helps individuals and families determine how the requirement to buy health insurance coverage will specifically impact them. Simply enter your age, state, income and any additional family members’ ages to determine what you can expect to pay for a Bronze, Silver, Gold or Platinum plan through the exchanges. The cost with and without the tax credit is calculated. You can also learn what your opt-out penalty will be should you choose to go without qualified health insurance coverage. Small business owners who offer health insurance to their employees may also use this calculator to determine costs.

Tax credit options

When you enroll in a state-based or federally facilitated health insurance plan with financial assistance, you will have two options4:

  1. Get it now – Elect to have the health insurance company apply all or some of the estimated tax credit to your monthly premium.
  2. Get it later – Claim the tax credit when you file your federal income tax return.

It is important to note that if your income or family size changes throughout the year, it may impact your premium tax credit. Be sure to report such changes to your state’s health insurance exchange so they may adjust your premium amount accordingly. Failing to do so may result in you owing money when filing your taxes, if your income increased or family size decreased. If your income decreases or family size increases and you fail to report it, you may receive a refund.

To learn more about health insurance coverage on and away from the Obamacare Health Insurance Marketplace, visit healthedeals.com. For help finding a health insurance plan, call 888-839-7679 to talk to an IHC representative.

Legal Disclaimers

1Office of the Assistant Secretary for Planning and Evaluation. "Health Insurance Marketplace 2015 Open Enrollment Period: March Enrollment Report." Washington, D.C.: Department of Health and Human Services. March 10, 2015. http://aspe.hhs.gov/health/reports/2015/MarketPlaceEnrollment/Mar2015/ib_2015mar_enrollment.pdf

2HealthCare.gov. “The Fee You Pay if You Don’t Have Health Coverage.” https://www.healthcare.gov/fees-exemptions/fee-for-not-being-covered/

3Internal Revenue Service. “The Individual Shared Responsibility Payment – An Overview.” Last reviewed or updated Feb. 19, 2015. http://www.irs.gov/Affordable-Care-Act/The-Individual-Shared-Responsibility-Payment-An-Overview

4Internal Revenue Service. “Questions and Answers on the Premium Tax Credit.” Last reviewed May 28, 2014.