Affordable Care Act

Part 1: Individual Shared Responsibility Payment


I get a lot of tax questions every year, but this tax season, one subject is topping the list — the Affordable Care Act, commonly known as Obamacare. Because this is a complex topic, I’ll be releasing a four-part series of blog posts and videos in the coming months to address the most commonly asked questions. Plan to follow the series on our blog.

President Obama signed the Patient Protection and Affordable Care Act into law six years ago.  The implementation of the Affordable Care Act is rolling out slowly over the course of many years; new mandates are introduced each year, continually creating questions among individual taxpayers and business owners.

As of Jan. 1, 2014, individuals have been required to purchase health insurance for themselves and their dependents. Taxpayers who don’t have proper health insurance for one or more months during the year must pay an additional tax called the individual shared responsibility payment.

How much is the penalty if I didn’t have health insurance last year?  
The short answer is $325 per adult + $162.50 per child, up to $975, or 2 percent of your income (whichever is greater).

In 2016, these amounts jump to $695 per adult + $347.50 per child, up to $2085 in penalties, or 2.5 percent of your income (whichever is greater).

Once you calculate those amounts:

  1. You take the greater of the two and divide it by 12 to convert it to a monthly penalty amount. You must pay the penalty for every month you were uninsured, even if it was only one month.
  2. Next, you’ll take this monthly amount and multiply it times the number of months in which you, your spouse and dependents did not have health insurance during the year. That will give you your penalty amount to report on your 1040.

You may be eligible for exemptions!
There is a bit of good news here.  There are many exemptions to this penalty, and about 12 million tax payers claimed a health care coverage exemption on their 2014 tax return.

Be sure to check back for next month’s blog, covering part two of this four-part series to see if you may qualify for an exemption.

If you have other questions, feel free to contact me directly by email at

Contributed by: Tina L. Moe, CPA, President & CEO

See the rest of the series!