Buying health insurance affects your taxes, as well as not buying it. Where you buy your health insurance can also make a big difference in its effect on your tax return. It’s critical to understand how health insurance affects taxes so you can submit your taxes more efficiently.
The Affordable Care Act’s purpose was to expand the number of people with health insurance in the United States. The act attempted to accomplish this in part by penalizing Americans who could afford health insurance but opted to remain uninsured.
The individual mandate required you to obtain health insurance if it cost less of your monthly family income, or you would face a penalty if you did not. If you couldn’t find coverage that met that affordability criterion, you wouldn’t be penalized.
When you submit your 2021 state income tax return in 2022, the penalty for not having coverage for the entire year will be at least $800 per adult and $400 per dependent child under the age of 18, or 2.5% of the household income, whichever is greater.
How Does Health Insurance Affect My Taxes?
Employer-Sponsored Health Insurance
Your portion of the bill is paid using pre-tax cash if your company provides health insurance as a benefit and you pay a portion of the plan’s premium. This implies the money isn’t subject to federal or state income tax withholdings, as well as Social Security and Medicare taxes.
Depending on your income and how many allowances you claim on your W-4 form. As of 2022, the total Social Security and Medicare tax rate is 15.3%. Your employer is responsible for half of that so you’ll see 7.65% deducted from each paycheck automatically.
Health Care Marketplace, Get Healthcare Coverage
If you are self-employed or your employer does not offer health insurance, please refer to the Health Care Marketplace. You may be eligible for a premium tax credit to help offset the cost of your monthly premiums, depending on your income level.
Because it’s difficult to predict future earnings, you can be given more advance payments than you qualify for. If that’s the case, you’ll have to make up the difference when you file your federal tax return.
Do I Get Penalized If I Don’t Get Health Insurance?
The cost of not having health insurance varies depending on your salary and where you reside. Expectations and criteria for these fees can change from one year to the next, so be sure you’re up to date with this information.
Resolve Your Tax Bills
If you’ve found yourself in a nasty mess with the IRS, take a deep breath. For taxpayers who may have difficulty paying off an excessive amount of tax debt, there’s a new and improved relief program that consolidates many major relief programs into a one-size-fits-all assistance program. Any issues regarding back taxes, unfiled years, or any other tax-related problems may be solved through one program; the IRS Fresh Start Program!
How Simple Is Qualifying?
Considering that the Fresh Start Program is a federal program, you would think meeting the qualifications may be very difficult, but really, it’s a lot simpler and quicker than you think. Take the following steps in order to find out if you are eligible in as little as 3 minutes.
- Fill out some basic information about yourself and your back taxes here.
- Have a representative reach out to you to discuss your eligibility.
- Go through the enrollment process and finally reduce or eliminate your tax liabilities.
