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Penalties of the Individual Mandate

The individual mandate starts January 2014 and is an important part of the Affordable Care Act. The individual mandate requires people legally living in the U.S. to buy a minimum amount of health coverage unless they are exempt. In general, people who don’t have to file taxes due to low income are exempt from the individual mandate.

How does it work? And what are the penalties for people who don’t get coverage?

When you file your 2014 taxes in 2015, you will need to report whether or not you had health coverage in 2014. If you did have coverage, you will then need to report if you qualified for a tax credit or subsidy. Health coverage includes a group plan, an individual plan, SCHIP, Medicare or Medicaid. If you don’t have health coverage, you will face a tax penalty. Each year, the penalty increases.

What are the tax penalties?

If a person doesn’t have a health plan, they will pay a tax penalty as follows:.

  • 2014: Penalty is the larger amount - $95 or 1% of taxable earnings
  • 2015: Penalty is the larger amount - $325 or 2% of taxable earnings
  • 2016: Penalty is the larger amount - $695 or 2.5% of taxable earnings