What’s New for 2014 —Tax Law changes every year. We keep track of all the tax law change to help you get your maximum refund and credit. Here are highlight of changes in 2014 for your reference.
Tax implication of the Affordable Care Act (ACA), also known as “Obama Care”:
Regardless of your health insurance situation, you may see a difference in your federal income taxes over the next few years due to the tax law changes in the Affordable Care Act. Several of those changes apply to effect last year tax returns, including a higher threshold for the medical expenses deduction and an additional Medicare and net investment income tax for higher-income Americans.
Changes for 2014 include the addition of the Health Insurance Premium Tax Credit (see below) and the Individual Shared Responsibility Provision. The majority of taxpayers will see minimal impact on their 2014 federal taxes. If you don’t have insurance, remember you may qualify for the advanced premium tax credit or a government-sponsored plan such as Medicare or Medicaid. Marketplace open enrollment for 2015 is November 15, 2014 to February 15, 2015. To apply, go to www.healthcare.gov.
Penalty for not having health insurance in 2014: Starting in 2014, you must have minimum essential coverage for health insurance or pay a tax penalty. If you have employer sponsored health insurance, an individual plan you purchase yourself, or insurance through a government program (Medicaid or Medicare), you don’t need to purchase other health insurance. However, insurance only cover vision or dental care, worker’s compensation, coverage for specific diseases or condition or discount plan my not meet the requirements. If you don’t have health insurance in 2014, you will need to pay the penalty on your 2014 tax return (due on 4/15/15). The penalty is 1% of your annual 2014 household income or $95 per person, which is higher. You pay penalty for yourself, your spouse and each of your dependents. The penalty for 2015 will increase.
Summary of Penalty for Failure to Maintain Health Coverage and Examples:
For 2014: For each month during which a nonexempt taxpayer fails to maintain minimum essential coverage in 2014, the applicable penalty is equal to one-twelfth of the greater of:
* $95 for each household member age 18 or older and $47.50 per child (up to three household members) or
*1 percent of household income for the taxable year in excess of the threshold amount for
filing a tax return.
Example 1: Single individual with $40,000 income
Jim, an unmarried individual with no dependents, does not have minimum essential coverage for any month during 2014 and does not qualify for an exemption. For 2014, Jim’s household income is $40,000 and his filing threshold is $10,150.
- To determine his payment using the income formula, subtract $10,150 (filing threshold) from $40,000 (2014 household income). The result is $29,850. One percent of $29,850 equals $298.50.
- Jim’s flat dollar amount is $95.
Jim’s annual national average premium for bronze level coverage for 2014 is $2,448. Because $298.50 is greater than $95 and is less than $2,448, Jim’s shared responsibility payment for 2014 is $298.50, or $24.87 for each month he is uninsured (1/12 of $298.50 equals $24.87).
Jim will make his shared responsibility payment for the months he was uninsured when he files his 2014 income tax return, which is due in April 2015. (Continued)