In 2014, in an effort to have every American have health insurance, President Obama introduced a penalty for people who didn’t have health insurance.
The fee started out small and quickly escalated. In 2017, the Tax Cuts and Jobs Act signed by President Trump revoked the penalty; however, the changes take effect in the 2019 tax year.
Although the health insurance penalty is no longer valid for the 2019 tax year, here’s what you need to know when filing your tax return for 2018 by the April 15, 2019 deadline.
Origin of the Health Insurance Penalty
In 2014, the health insurance penalty was $95 for every adult in the household without health insurance and $47.50 per child. The maximum amount per family was $285.
However, the penalty jumped to $325 per adult, $162.50 per child, and a maximum of $975 per family the next year. In 2016, the fees reached their all-time high of $695 per adult, $347.50 per child, and a $2,085 maximum per family.
These penalties are technically still effective for the 2018 tax year, so unless you can’t afford to pay, this will be your last year paying the health insurance penalty for not having health insurance.
What’s Changed for the 2018 Tax Year
Effective January 1, 2019, there are no longer any financial ramifications for not having health insurance.
However, you could still face Obamacare penalties when you file your 2018 tax return. There will be places on federal form 1040 where you calculate and include any penalties for not having health insurance which you’ll then have to pay in addition to your normal tax liability.
So if you could afford insurance but did not get coverage, you could pay a penalty of 2.5 percent of your yearly household income or $695 per person ($347.50 per child under 18), whichever is greater.
Although the Tax Cuts and Jobs Act eliminated the penalties, they don’t take effect until the 2019 tax year, which will be when you file your taxes in 2020.
You May Be Exempt from Paying the Penalty
Under certain circumstances, you may be exempt from paying the health insurance penalty for your 2018 taxes if you were uninsured.
For people who were experiencing homelessness, facing eviction, experiencing domestic violence, a natural disaster, bankruptcy, substantial medical expenses that resulted in debt, or other hardships, you won’t be obligated to pay the penalty for not having health insurance.
In the 2018 tax year, you won’t have to apply to get a hardship exemption. You can simply claim it on your tax return. However, you can also complete an application for it should you wish and submit documentation.
The Future of the Obamacare Tax
While you may still have to pay a penalty for not having health insurance in the 2018 tax year, you’ll no longer have to pay a fee for not having health insurance even though you’re still required to have coverage.
As of 2019, there are no plans for future ramifications for not having health insurance. When you file your taxes in 2020, the penalty is no longer valid and so even if you don’t have health insurance in 2019, you won’t be required to pay a fine.
Do you need assistance figuring out whether or not you owe a penalty for health insurance on your 2018 tax return? If you owe the penalty and aren’t sure if you quality for a hardship exemption, talk to your tax professional to see how much you owe and if you may be exempt from paying the health insurance penalty.