A couple got an Obamacare “unaffordable” exemption from buying health insurance while having an income 70% higher than “poverty level.” This prompted my writing the following.
Suppose two retired married couples, each person 62-64 years old, have $50,000 income in 2016. All of couple #1’s income is from Social Security. All of couple #2’s income is from a private retirement plan and fully taxable. Neither couple has any health insurance (they aren’t eligible for Medicare until age 65).
Couple #1’s federal income tax is $0. They also face no Obamacare penalty (so-called “shared responsibility payment”) for not having health insurance. They get an “unaffordable” exemption because their income is not high enough to require filing a tax return.
Couple #2 is required to file a tax return since their private retirement plan is not exempt from income tax. With the standard deduction and personal exemptions, they owe federal income tax of $3,471. They also owe an Obamacare penalty of $1,390 (= 2 * $695) for not having "minimum essential coverage."
Since employees pay FICA taxes (towards Social Security) with after-tax dollars, the income tax difference makes some sense. However, health insurance deemed “unaffordable” for couple #1 with $50,000 after-tax income, but deemed “affordable” for couple #2 with $46,529 after-tax income? That is incoherent.
No comments:
Post a Comment