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Do I really have to have health insurance in 2014?

By now you've probably heard you must have health insurance in 2014 or pay a tax penalty. (In fact, 88 percent of Americans say they're aware of the "individual mandate" law, according to a recent Insure.com poll.)

health insurance requirement in 2014But like any rule, this one has exceptions.

Here are the reasons you can be excused from the penalty if you're uninsured.

  • Very low income. Your income is low enough that you don't have to file a federal income tax return. The filing threshold depends on your age, filing status and the types of income you earn.
  • Unaffordable premiums. Health insurance is considered "unaffordable" if the minimum premiums are more than 8 percent of your household income.
  • Religious reasons. You belong to a religious group that opposes accepting insurance benefits. The law spells out the criteria, and the Social Security Administration is administering the process for recognizing such groups.
  • Health care sharing. You participate in a health care sharing ministry.
  • Locked up. You're in jail or prison.
  • Here for a short time from another country. Foreign nationals who don't live here long enough to qualify as resident aliens for federal income tax purposes are exempt, even if they have to file an income tax return.
  • Short coverage gap. You were uninsured for only a short period of time during the year -- less than three consecutive months. If you are insured one day during the month, then you are considered insured for the entire month.
  • Indian tribe membership. You are a member of a federally recognized Indian tribe.
  • Hardship. You suffered a hardship making it difficult to buy health insurance. A hardship could be any event, such as a natural disaster, that causes your expenses to increase and makes it difficult to pay for health insurance coverage and still afford life's necessities.

How to get an exemption

You're automatically excused from the individual mandate if you don't earn enough income to file a federal tax return. You don't have to take further action to claim the exemption.

For the other exemptions, you must apply for a certificate of exemption from your state's health insurance marketplace or claim the exemption when filing your 2014 taxes, depending on the type of exemption.

The health insurance marketplaces will provide certificates of exemptions for religious convictions and most hardship cases. For exemptions related to Indian tribe membership, incarceration and health care ministry membership, you can apply through the marketplaces or claim those exemptions when filing federal income taxes.

You can find your state marketplace through the healthcare.gov website.

Other exemptions can be claimed only through filing taxes. Those exemptions are for unaffordable coverage, coverage gaps, some hardships and foreign nationals who do not qualify as resident aliens.

No exemption -- now what?

The penalty for going uninsured in 2014 is $95 for individuals or 1 percent of taxable household income above the filing threshold, whichever is higher. The penalties for individuals increase to $325 or 2 percent of income in 2015 and $695 or 2.5 percent of income in 2016. After 2016, penalty increases will be indexed to inflation.

The Internal Revenue Service says information will be available later about how federal tax returns will account for coverage and exemptions. Any penalties likely would be subtracted from tax refunds.

The biggest potential financial hit from lacking health insurance, though, isn't the government penalty, but the cost of medical care if you get seriously ill or injured.

Before giving up on coverage, see if you qualify for a government program, such as Medicaid, which provides free health insurance for low-income people, or for discounts, in the form of tax credits, on private health plans sold through the new health insurance marketplaces. Discounts will be available to people who earn up to 400 percent of the federal poverty level, which in 2013 is $45,960 for an individual.

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