The Supreme Court refashioned the individual mandate as a tax for 2014.
Insurance or Tax?
The individual mandate tax is unprecedented. As written, PPACA (healthcare reform legislation) established an individual mandate to buy health insurance and a penalty for not doing so. This was the first time in American History that the federal government ordered the general population to purchase a commercial product. Responding to the lawsuits by NFIB and 26 states, the Supreme Court refashioned the mandate and penalty into a choice between two options: Buy Insurance or Pay a Tax for Failing to do so!
Individual mandate taxes begin in 2014 and rise thereafter.
Taxes begin in 2014 and rise in years following. In each year, the tax consists of the higher of a dollar amount or a percentage of household income. For a given household, the tax applies to each individual, up to a maximum of three. Following is the schedule of taxes:
• 2014: The higher of $95 per person (up to 3 people, or $285) OR 1.0% of taxable income.
• 2015: The higher of $325 per person (up to 3 people, or $975) OR 2.0% of taxable income.
• 2016: The higher of $695 per person (up to 3 people, or $2,085) OR 2.5% of taxable income.
• After 2016: The same as 2016, but adjusted annually for cost-of-living increases.