Calculating your health insurance tax penalty

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By Christina O'Haver By Christina O'Haver

PHOENIX -- The government estimates that nearly 6 million people will face a tax penalty for not having health insurance when they file their 2014 tax return.

That penalty is $95 per person, but since it is the first year for penalties, there is a cap for families.

“The maximum penalty for 2014 is $295," Valley accountant Ralph Willett said.

But for 2015, the cap disappears and penalties go up.

“The per-person rate is basically doubled," Willett explained. "Then the second calculation is based on your household income, and that went from 1 percent to 2 percent."

And Willett says to make sure that you pay, the penalty is included on your tax form under "health care: individual responsibility." You can see it on form 1040 in line 61.

“If you had health coverage for the full year, you just check the box and you are done,” Willett said.

But if you did not have insurance, you have a two calculations to go through.

For 2015, let's take a look at a sample family: two adults and two kids.

First calculation: for any adult in the house without insurance, you owe $325. For any uninsured child, you owe $162.50.

For this sample family, that is $975. But it is not that simple, Willett warns.

"You cannot just figure the per-person one and call it good," he said. "That won't suffice.”

The government requires a second calculation based on income.

Our sample family makes $40,000, but the IRS does allow some subtractions based on filing status.

Married and filing jointly, our family gets to take off $20,300, leaving $19,700. They multiply that by 2 percent, which comes to $394.

And here is the point of all this: you pay the greater of those two figures. In this case, it is the $975.

But as you can tell, there are lots of variables, like how many kids you have, your filing status, and, of course, your income. So, Willett advises to not try doing this by hand.

“You really are going to want to do a computer because there are two calculations," he said.

And finally, Willett says, don't just claim you have insurance and hope for the best. He says about all that will ensure is that you end up paying a penalty for not paying the penalty.

Now remember, you do have to go through that process on the return you file this year for 2014, and you will have to do it again next year.

And here is one bit of relief: if you had to pay a penalty this year, the government will allow you one more chance to enroll. It is reopening the exchange between March 15 and April 30 at www.healthcare.gov.