Obamacare and Your 2014 Taxes: What You Need to Know
It’s only January, but you may already be growing weary of all the tax season talk. Don’t tune out, though - the tax code is more complicated this year than ever, and it’s important to stay informed so you can maximize your tax refund (or minimize your payments) without risking an audit.
The Affordable Care Act, or Obamacare, definitely adds some stress for the average taxpayer. It can be difficult to understand what’s required, what to expect, and what to write off. Health care is now an important tax issue, and a confusing one. Here are a few things you should know about how Obamacare affects your tax filing:
1. Your 2014 income could affect your subsidies.
When you applied for Obamacare, you were required to enter your expected 2014 income. If your actual income was greater than the estimate, any subsidies you received to help you pay for your premiums could decrease - and you may even owe the IRS money.
This is because the subsidies are actually tax credits based on your 2014 income. You may have received your subsidy before you actually knew how much income you would earn during the year - or maybe you received a raise, or a bonus. If you didn’t adjust your information to account for the increase, prepare for the possibility that your health care subsidies - and your tax refund - could be less than you were hoping for.
2. If you were uninsured, you may be fined.
It’s now required by federal law that individuals carry health insurance, unless they are eligible for an exemption. If you are not exempt and did not enroll in a health insurance plan for 2014, you can expect the IRS to hand over a fine. This is called the Individual Shared Responsibility fee.
Studies are showing that many Americans underestimate the amount of the fee that will be imposed, so let’s get the record straight: if you or your family did not maintain coverage throughout 2014 and did not qualify for an exemption, you will be fined $95 per adult and $47.50 per child (limited to $285 per family) or one percent of your income, whichever is greater.
The rollout of the Affordable Care Act is a big adjustment for many taxpayers. If you are having trouble understanding how it affects your tax refund, or want to know what you can do to improve your situation for the coming year, contact us for information and filing assistance.