What tax penalty?

As tax season is quickly approaching, some of you may notice a penalty tax on your income tax returns. In the previous years, there have been a penalty associated with not having credible health insurance coverage. In 2018, the penalty tax was $695 per adult or 2.5% of household income, whichever is greater. However, there are several exemptions to this rule including, but not limited to:

• income hardships (foreclosure, bankruptcy, death in family, etc.)

• income not high enough to file taxes

• lived abroad for 330 days or more in a year

• eligible for services from Indian Health Service

• part of a sharing ministry

• religious exemptions

• incarceration

• uninsured for no more than 2 months in a row

For those of you who keep up with the news and current events, this information may seem irrelevant. The individual mandate is not gone! For 2019, the penalty tax simply reduced to $0. So for this year, you will not be penalized for not having credible coverage. Because the health insurance world is ever-changing, this $0 tax penalty is not necessarily permanent in the years to come.

That being said - do not purchase health insurance simply to avoid a tax penalty. The purpose of insurance is to protect you and your loved ones from the unexpected. President Obama, in his 2009 State of the Union address, said that a medical bankruptcy occurred every 30 seconds. That is 1 million bankruptcies a year from Americans being either uninsured or under-insured! Now fast forward a few years. CNBC reported that nearly 2 million Americans are being affected by medical bankruptcy, making healthcare the number 1 cause of bankruptcies. Moral of the story - please make sure you are well protected!