On March 23, 2010, President Obama signed the Patient Protection and Affordable Care Act of 2010 into law. Together with the Health Care and Education Reconciliation Act of 2010 (collectively, the “Acts”), signed March 30, 2010, the Acts represent a massive overhaul of the United States’ health care system. While the centerpiece of these reforms is the mandate for most residents to obtain health insurance, changes to the United States’ federal tax laws constitute a significant part of health care reform.
TAX CHANGES IMPACTING INDIVIDUALS:
- Penalty for Remaining Uninsured. Currently, only residents of Massachusetts are required to have
health insurance. However, beginning in 2014, nonexempt U.S. citizens and legal residents will be
required to maintain “minimum essential coverage.” Those without coverage will face a penalty equal to the greater of (i) $695 per year, up to a maximum of $2,085 per family; or (ii) 2.5% of household income over the income tax filing threshold (in 2010, the threshold for taxpayers under the age of 65 is $9,350 for single taxpayers and $18,700 for couples). The penalty will be phased in over three years, with the full penalty not imposed until 2016.
Exemptions will be granted for financial hardship, religious objectors, American Indians, incarcerated individuals, those for whom the lowest cost plan option exceeds 8% of household income, those with incomes below the tax filing threshold, and those residing outside the U.S.
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