Most people are looking at the penalty for not complying with the law and buying health insurance as not a big deal. After all, he noted, the penalty is just $95. How much could that possibly matter? - NOT ALWAYS THE CASE!
This is a common bit of confusion. The individual mandate's penalty is not just $95 in year one. It's $95 or 1 percent of your taxable income, whichever is greater. So if you make $80,000 in taxable income, the penalty is $800. And the fine grows each year. In year two, it's $325 or 2 percent of your taxable income. In year three, it's $695 or 2.5 percent of taxable income. After that, it holds steady.