Health care coverage gaps happen. Whether because of job loss or an extended sabbatical between gigs, you may find yourself without health care for a period. Here are some tax consequences you should know about, as well as tips to fix a coverage gap.
You will have to pay a penalty in 2018 if you don’t have health care coverage for three consecutive months or more. Last year the annual penalty was equal to 2.5 percent of your household income, or $695 per adult (and $347.50 per child), whichever was higher. The 2018 amounts will be slightly higher to adjust for inflation.
Example: Susan lost her job-based health insurance on Dec. 31, 2016, and applied for a plan through her state’s insurance marketplace program on Feb. 15, 2017, which went into effect on April 1, 2017. Because she was without coverage for three months, she owes a fourth of the penalty on her 2017 tax return (three of 12 months uncovered, or 1/4 of the year).
While the penalty is still in place for tax years 2018 and earlier, it is eliminated starting in the 2019 tax year by the Tax Cuts and Jobs Act.
There are three main ways to handle a gap in health care coverage:
The information contained in this newsletter is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance. For more information or for assistance with any of your tax or business concerns, contact our office at 856.667.4100.
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