Fast & Easy Guide If You Don’t Have Health Coverage


Under the American Care Act also called “Obamacare” program, there are severe penalties for those Americans who do not have health insurance, if their adjusted gross income is sufficient to be able to afford it. The Internal Revenue Service (IRS) imposes these penalties.

For the year of 2016, the penalty is equal to the cost of the health insurance. Essentially, if income is high enough to afford the health insurance, according to the income rules, and a person does not get it, they pay the same in tax penalties as if they bought the health insurance.

This is one of the reasons why those without health insurance in America dropped to 11.4% by the second quarter in 2015 as reported by Obamacare facts. The choice is to either get health insurance or pay an equivalent tax penalty and get nothing for paying a penalty.

Penalty Rules for 2016

The 2016 deadline for enrolling in a health care program to avoid paying any penalty was January 31, 2016. Penalties may be imposed on those who did not take action to get health care by that date. Any penalty, if imposed, is calculated for each month there was no health care in place.


There are many exemptions from the penalty. has an exemption screener tool that asks a series of questions to determine if an exemption applies. For those that think they might owe a penalty, the exemption tool will inform them if they are exempt. They should use this tool and answer the questions to see if they qualify for an exemption.Health_coverage

Examples of exemptions include such things as already having extraordinary medical expenses, going bankrupt, experiencing foreclosure, living outside the United States, or being homeless.

Low Income Persons

Persons who are at the poverty level qualify for Medicaid. They do not have to pay for health insurance. Those who have slightly higher income may receive financial support that helps pay for health insurance. The IRS offers an income threshold tool that asks a series of questions to determine if there is a complete exemption from having to pay for health insurance or if there is a individual shared responsibility that requires the person to partially pay for the health insurance.

Persons with Sufficient Income

The income thresholds come from tax filing thresholds. Those not required to file a tax return are exempt. The tax filing thresholds from 2014 are the latest figures. For an individual it was $10,150 and for a household it was $20,300. These figures may change slightly for 2016.

Assuming a person or household meets the income threshold levels, the penalty is based on either the higher amount of a calculation based on a percentage of income or the flat rate per person. shows example calculations of how to estimate the penalty fee for 2016.

Here are the steps necessary to make the penalty estimation:

1. Make an Estimate of Income
In order to be able to estimate the penalty for 2016, an estimate of income is necessary. This income is NOT total income; it is the income after certain adjustments.

The figure to start with is the Adjusted Gross Income (AGI), which appears on line 37 of IRS form 1040. If nothing changed substantially from 2015, use the AGI from the 2015 tax return. Otherwise, make an estimate of AGI for 2016 based on changes expected during this year.

Modified AGI
For most people an estimate of Adjusted Gross Income (AGI) and Modified Adjusted Gross Income (MAGI) will be the same. For some people who have special circumstances the AGI is either increased or decreased to calculate the MAGI. The MAGI is used to make the penalty estimation. gives an explanation how to calculate the MAGI.

2. Calculate the Fee
Either calculate the fee by hand or use the convenient 2016 Obamacare Penalty Calculator, which asks questions, requires an estimation of MAGI, and then calculates the fee.

To calculate the fee by hand, compare 2.5% of the MAGI with the Flat Rate per person of $695 for each adult and $347.50 for each child in the household. The fee is the higher of the two figures, up to a maximum penalty of $2,448 for an individual and $9,792 for a household.

If health insurance was in place for any month during 2016, the fee reduces by 1/12 for each month that health insurance was in place.


Not having health insurance when one can afford it is a serious mistake. The penalty fees are equal or potentially higher than the cost of the health insurance and there is no benefit from the penalty fees whatsoever.

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