2018 How to Calculate Health Insurance Penalty

The 2018 health insurance penalty is a financial penalty imposed by the US government on individuals who do not have qualifying health insurance coverage. This penalty applies to most US citizens and legal residents who do not have minimum essential coverage.

What is the health insurance penalty?

The health insurance penalty, also known as the individual shared responsibility payment, is a tax imposed by the Affordable Care Act (ACA) on individuals who do not have qualifying health insurance coverage. The penalty applies to most US citizens and legal residents who do not have minimum essential coverage.

The penalty is designed to encourage individuals to obtain health insurance coverage, as having insurance helps protect against high medical costs. The penalty amount varies depending on the individual's income and household size.

Note: The health insurance penalty was last applied in 2018. For 2019 and later years, the penalty was repealed as part of the Tax Cuts and Jobs Act.

How to calculate the penalty

Calculating the health insurance penalty involves several steps. First, you need to determine if you qualify for the penalty based on your income and household size. If you qualify, you then calculate the penalty amount using the appropriate formula.

The penalty calculation is based on the individual's income and household size. The penalty amount is determined by comparing the individual's income to the federal poverty level (FPL) and applying the appropriate penalty percentage.

For 2018, the penalty was calculated as follows:

If your income is between 100% and 133% of the FPL, you pay 1% of the amount by which your income exceeds 100% of the FPL.
If your income is between 133% and 200% of the FPL, you pay 2% of the amount by which your income exceeds 133% of the FPL.
If your income is between 200% and 300% of the FPL, you pay 3% of the amount by which your income exceeds 200% of the FPL.
If your income is between 300% and 400% of the FPL, you pay 4% of the amount by which your income exceeds 300% of the FPL.
If your income is above 400% of the FPL, you pay 5% of the amount by which your income exceeds 400% of the FPL.

Penalty calculation formula

The formula for calculating the health insurance penalty in 2018 is as follows:

Health Insurance Penalty = (Income - (100% of FPL)) × Penalty Percentage

Where:

Income = Your total household income
FPL = Federal Poverty Level for your household size
Penalty Percentage = The applicable penalty percentage based on your income level

The federal poverty level (FPL) for 2018 is as follows:

Household Size	Federal Poverty Level (2018)
1	$12,060
2	$16,380
3	$20,640
4	$24,920
5	$29,100
6	$33,240
7	$37,380
8	$41,520

Penalty calculation examples

Let's look at some examples to illustrate how the health insurance penalty is calculated.

Example 1: Single person with income of $20,000

For a single person with an income of $20,000:

Federal Poverty Level (FPL) for 1 person = $12,060
Income exceeds 100% of FPL by $7,940
Penalty Percentage = 1% (since income is between 100% and 133% of FPL)
Health Insurance Penalty = $7,940 × 1% = $79.40

Example 2: Family of 4 with income of $50,000

For a family of 4 with an income of $50,000:

Federal Poverty Level (FPL) for 4 people = $24,920
Income exceeds 200% of FPL by $25,080
Penalty Percentage = 3% (since income is between 200% and 300% of FPL)
Health Insurance Penalty = $25,080 × 3% = $752.40

Penalty comparison table

The following table compares the health insurance penalty for different income levels and household sizes in 2018.

Household Size	Income Level	Penalty Percentage	Example Penalty
1	$15,000	1%	$294
2	$22,000	2%	$528
3	$30,000	3%	$936
4	$40,000	4%	$1,592.80
5	$50,000	5%	$2,450

Frequently asked questions

Who is eligible for the health insurance penalty?: Most US citizens and legal residents who do not have qualifying health insurance coverage are eligible for the health insurance penalty. Exemptions include individuals who are incarcerated, members of certain tribes, and individuals who have a hardship exemption.
How is the health insurance penalty calculated?: The health insurance penalty is calculated based on the individual's income and household size. The penalty amount is determined by comparing the individual's income to the federal poverty level (FPL) and applying the appropriate penalty percentage.
When is the health insurance penalty due?: The health insurance penalty is due with your annual federal income tax return. If you owe the penalty, you will receive a bill from the IRS. If you do not owe the penalty, you will receive a refund.
Can the health insurance penalty be paid in installments?: Yes, the health insurance penalty can be paid in installments. The IRS offers an installment agreement program that allows you to pay the penalty in monthly installments over a period of up to 10 years.
Is there a limit to the health insurance penalty?: Yes, the health insurance penalty is limited to the amount of the premium tax credit that would have been available to the individual if they had purchased insurance through the Health Insurance Marketplace. This limit ensures that the penalty does not exceed the cost of obtaining health insurance coverage.