TurboTax / Tax Calculators & Tips / All Tax Guides / Health Care / What is the Individual Shared Responsibility Provision?

What is the Individual Shared Responsibility Provision?

Updated for Tax Year 2015


OVERVIEW

The individual shared responsibility provision lies at the heart of the Affordable Care Act - the 2010 health care law sometimes referred to as Obamacare. This is the provision that requires Americans to have health insurance coverage and that imposes a tax penalty on those who choose to go uninsured.


Purpose of the provision

The Affordable Care Act prohibits health insurers from denying people coverage based on their medical history – for example, because they have a pre-existing condition or a family history of a particular ailment. However, insurers and lawmakers feared that this would produce a situation in which many people wouldn't buy health insurance at all – until they got sick. But to stay in business, a health insurance company needs to collect more money in premiums than it pays out in benefits, and that means healthy people have to buy insurance, too. That's where the individual shared responsibility provision comes in.

what is the shared responsibility provision

Individual responsibility

Under the ACA, the government, insurance companies, employers and individuals all share responsibility for keeping health coverage available and affordable. The individual shared responsibility provision outlines individuals' role in this. In short, it says you must either have basic health insurance, receive an exemption or pay a penalty. The law refers to this penalty as a "shared responsibility payment;" the Supreme Court has ruled that the penalty is a federal tax.

We can help walk you through this provision and avoid penalties when you do your taxes online with TurboTax. Get the facts at TurboTax.com/health-care.

Avoiding the penalty

You avoid the penalty if you have health insurance that provides what the law calls "minimum essential coverage." This includes nearly all employer-provided health plans, as well as coverage provided through government programs such as Medicare, Medicaid, veterans' health benefits and military Tricare plans. Coverage purchased through online health-care exchanges also qualifies.

If in doubt, ask your plan provider whether your coverage qualifies. If you don't have coverage, you can also avoid the penalty if you qualify for an exemption. Exempt groups include:

  • Certain low-income people
  • Incarcerated individuals
  • Members of federally-recognized Native American tribes
  • Undocumented immigrants
  • Americans who are outside the country, and those whose religious beliefs prohibit them from accepting insurance benefits
  • Individuals who can demonstrate hardship that prevents you from getting coverage

Not sure if you are exempt from the tax penalty or from the requirement to purchase health insurance? The TurboTax Exemption Check, is a free, online tool to help determine whether you might be eligible to waive the tax penalty entirely and apply for a health care exemption.

Paying the penalty

If you don't have coverage and aren't exempt, the law requires you to make a shared responsibility payment with your federal tax return. The law called for these payments to be phased in over three years, starting with the 2014 tax year.

The penalty you pay for not having health coverage is either a dollar amount or a percentage of family income, whichever is greater. For the law's first year, 2014, the law set the annual penalty at $95 per adult and $47.50 per child, up to a maximum of $285 per family—or 1 percent of family income, whichever is greater. For 2015, the penalty was set at $325 per adult and $162.50 per child, up to a maximum of $975 per family—or 2 percent of family income, whichever is greater. For 2016 and beyond, the law set the penalty at $695 per adult and $347.50 per child, up to a maximum of $2,085 for a family—or 2.5 percent of income, whichever is greater. Penalties are to rise with inflation.

Pro-rating the penalty

If you go uninsured for only part of a year, you must pay only a partial penalty, which is pro-rated for the amount of time you were without coverage. Say your penalty comes to $1,380, and you were uninsured for five months out of the year. Your penalty would be $575 – five-12ths of $1,380. No penalty applies for uninsured periods of less than three months.

Get every deduction you deserve

TurboTax Deluxe searches more than 350 tax deductions and credits so you get your maximum refund, guaranteed.

For only $54.99*
Start for Free

The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.


Security is built into everything we do
Here's how
* Important Offer Details and Disclosures
  • Filing Deadline: IRS filing deadline for tax year 2015 is April 18, 2016 (except for residents of Massachusetts or Maine, where the IRS filing deadline for tax year 2015 is April 19, 2016).
  • Try for Free/Pay When You File: TurboTax online and mobile pricing is based on your tax situation and varies by product. Free 1040EZ/A + Free State offer only available with TurboTax Federal Free Edition; Offer may change or end at any time without notice. Actual prices are determined at the time of print or e-file and are subject to change without notice. Savings and price comparisons based on anticipated price increase expected 3/18/16. Special discount offers may not be valid for mobile in-app purchases.
  • TurboTax CD/Download products: Price includes tax preparation and printing of federal tax returns and free federal e-file of up to 5 federal tax returns. Additional fees apply for efiling state returns. E-file fees do not apply to New York state returns. Savings and price comparison based on anticipated price increase expected 3/18/16. Prices subject to change without notice.
  • Anytime, anywhere: Internet access required; standard message and data rates apply to download and use mobile app.
  • Fastest refund possible: Fastest tax refund with efile and direct deposit; tax refund timeframes will vary.
  • Pay for TurboTax out of your federal refund: A $X.XX Refund Processing Service fee applies to this payment method. Prices are subject to change without notice. This benefit is available with TurboTax Federal products except the TurboTax Home & Business/QuickBooks Self-Employed bundle offers.
  • About our TurboTax Product Experts: Customer service and product support vary by time of year.
  • About our credentialed tax experts: Live tax advice service is available via phone for your toughest tax questions; fees may apply. Service, experience levels, hours of operation and availability vary, and are subject to restriction and change without notice. Not available for TurboTax Business customers.
  • #1 best-selling tax software: Based on aggregated sales data for all tax year 2014 TurboTax products.
  • Most Popular: TurboTax Deluxe is our most popular product among TurboTax Online users with more complex tax situations.