When then President Barack Obama passed his Health Care initiative (officially known as the Affordable Care Act and not so fondly referred to as “Obamacare” by detractors), his mandate was to ensure that everyone – especially families, had health care. To do that he initiated a number of steps:
- He created the “Marketplace” where every person, family, etc was guaranteed to be able to secure health insurance.
- He enacted a series of subsidies to ensure that persons, and families who otherwise could not afford health insurance were able to afford it thru the "Marketplace" utilizing subsidies.
- He allowed States to set up their own “Marketplaces” to spur competition amongst health care providers within each state.
- He established the reporting of "Marketplace" benefits to taxpayers via variants of Form 1095-A.
- He created a series of penalties for taxpayers who still chose not to carry health insurance for either themselves or their families. In some instances, these penalties were extremely cumbersome and costly to taxpayers. Again, it was meant to be a penalty for failing to comply.
- The penalty’s capped out at $ 695 per adult or a maximum penalty of $ 2,085 per family or 2.5% of the households income – whichever was higher.
When Donald Trump took over as President, he attempted (unsuccessfully) to overturn the entirety of “Obamacare”. However, on December 22, 2017, President Trump did sign sweeping tax legislation into law, which effectively eliminated the Affordable Care Act’s "Penalty" for failing to have health insurance. Most people thought that was it. However, the elimination of the penalty, did not take effect until tax year beginning on or after December 31, 2018 – effectively meaning that people may still owe the penalty when they file their 2018 tax returns. This will surprise A LOT of people.
For 2019, there no longer is an IRS tax penalty for failing to have health insurance. Unfortunately, residents of New Jersey have another “surprise” to look forward to. Proving that, once again, our politicians are out of touch with the people they serve. On May 30, 2018, our new Governor, Phil Murphy signed into law, legislation which effectively reinstated the penalty for NJ residents. Whereas the Federal government will no longer charge a penalty to those who choose not to have health insurance, the great State of New Jersey, will now be one of only two states (along with Massachusetts) to have a health care penalty. This penalty will be calculated and collected on your 2019 New Jersey Resident Income Tax returns. This penalty took effect as of January 1, 2019 and the penalty will mimic the penalty formerly charged under the Federal requirements of the Affordable Care Act.
So, if you have elected not to carry health coverage and thought you were out of the woods with the passage of Trumps legislation, guess again. The State of New Jersey expects to collect between $90 and $ 100 million from it’s citizens in these penalties. If that wasn’t bad enough, because the Federal government has largely stopped subsidizing insurance costs bought from the “Marketplace”, most health care coverages purchased from the New Jersey marketplace are expected to increase by 20% or more for 2019.
Our new Governor has decided you have to have insurance or you will be subjected to paying a penalty – and he now expects you to pay more for that insurance to boot. NJ has the highest real estate tax rates in the country (to go with the 7th highest median home prices). The sixth highest state income tax rates in the country. The eighth highest unemployment rate in the country.On top of ALL of that, the rest of the country doesn’t have to endure penalties for not having health insurance – but as a resident of New Jersey, you do. Here’s one last sobering statistic for you- New Jersey is also the # 1 state in the country that people move out of. I can’t, for the life of me, imagine why…..
This article is designed to inform our readers of what is happening in the tax arena. Most CPA firms concentrate on preparing a tax return for you. Very little thought or effort is given by most CPA firms into figuring out how your CPA can help you. How can they lower your taxes or improve your quality of life. We’re different, and we invite you to find out what “Not All CPA’s are Alike” really means. Please feel free to call us at (973) 276-0833 for a free consultation.