Calculating the Individual Mandate Penalty Tutorial

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In this video, we explain how the individual mandate penalty is calculated for various income levels and household sizes.

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When calculating the individual mandate penalty for people who go without health coverage, we use the greater of a flat dollar amount or a percentage of income.

2014 2015 2016
Flat Dollar $95 per adult, $47.50 per child with a cap of $285 per household $325 per adult, $162.50 per child with a cap of $975 per household $695 per adult, $347.50 per child with a cap of $2,085 per household
Percentage of Income 1% of income capped at national average bronze premium for an individual x the number of individuals subject to a penalty up to a maximum of 5 2% of income capped at national average bronze premium for an individual x the number of individuals subject to a penalty up to a maximum of 5 2.5% of income capped at national average bronze premium for an individual x the number of individuals subject to a penalty up to a maximum of 5

 
The calculation for the percentage of income, however, is based on applicable income, defined as “the amount by which an individual’s household income exceeds the applicable tax filing threshold for the applicable tax year” (source: Congressional Research Service).

The tax filing threshold is the amount of income below which a taxpayer is not required to file a tax return. This amount needs to be subtracted from the household income before multiplying by the applicable percentage (1% in 2015, 2% in 2015, and 2.5% in 2016).

Tax Filing Threshold by year

tax filing threshold

For more information about calculating the individual mandate penalty, take a look at the Congressional Research Service’s report “Individual Mandate Under ACA” from August 12, 2014.


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