Tax Dictionary – Affordable Care Act Penalty

IRS Definition

The individual shared responsibility provision of the Affordable Care Act requires taxpayers to do at least one of the following:

  • Have qualifying health coverage (called minimum essential coverage)
  • Qualify for a health coverage exemption
  • Make a shared responsibility payment with their federal income tax return for the months without coverage or an exemption.
  • For Tax Year 2017, the IRS will not consider a return complete and accurate if the taxpayer does not report full-year coverage, claim a coverage exemption, or report a shared responsibility payment on the tax return.

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Everyone in your family must have health insurance coverage, qualify for an exemption (for example: the lowest cost coverage is not affordable, you have a hardship, or belong to a group exempt from the coverage requirement), or you must pay a Shared Responsibility Payment which some refer to as the no insurance penalty or penalty for not having insurance.

If you do not have health insurance coverage and do not qualify for an exemption, you must calculate your Shared Responsibility Payment when you complete your tax return. The payment is the greater of the flat dollar amount or a percentage of your household income (varies by tax year) but is capped at the amount of the premium for a bronze level health plan. Your tax professional or tax software will help you calculate your payment.

Learn how to address an unpaid tax bill.

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