Tax Penalty For No Health Insurance 2020
What is the penalty for not having health insurance? A taxpayer who fails to get health insurance that meets the states minimum requirements will be subject to a penalty of $695 per adult, or 2.5% of annual household income, whichever is higher when they file their 2020 state income tax return in 2021. The penalty for a dependent child is half of what it would be for an adult. According to Covered California, a family of four that has no insurance for the entire year could face a penalty of at least $2,000.
Federal Penalty Applied From 2014 Through 2018
When it comes to encouraging people to have health insurance, the ACA has plenty of carrots, including guaranteed-issue coverage and subsidies to make coverage and care more affordable . But for several years there was also a stick, in the form of a financial penalty for people who failed to maintain health insurance coverage throughout the year.
The penalty was implemented in 2014, and became progressively steeper through 2016. The average penalty for people who were uninsured in 2015 was $470 up from $210 the year before. And according to data from the IRS, the average penalty was $708 for tax filers who owed the penalty for being uninsured in 2016.
For 2017 and 2018, the penalty remained at the same level it was at in 2016. But the penalty was eliminated after the end of 2018, as a result of the Tax Cuts and Jobs Act that was enacted in late 2017 .
The ACA’s individual mandatethe requirement that people maintain minimum essential coverageis still in effect. But there is no longer a federal penalty for non-compliance. So people who are currently uninsured are not subject to a federal penalty. They’re still stuck without health insurance if they end up needing medical care, and unless they experience a qualifying event , they won’t have an opportunity to enroll in coverage until the annual open enrollment period.
Have A Valid Exemption
There are a few circumstances in which you may be exempt from paying a tax penalty. The following are some common exemptions:
- Coverage is considered to be unaffordable: Coverage through your employer or through a health benefit exchange may be considered unaffordable if it costs more than 8.13% of your total household income.
- You had a short coverage gap: A short coverage gap means you are uninsured for less than three consecutive months during the year.
- Your income is lower than the state threshold for tax filing: If your income is lower than the state tax filing requirement, you may not be required to file taxes or pay a penalty for not having health insurance.
- You were incarcerated: You may be exempt from the tax penalty if you were incarcerated.
- You are a member of an Indian Tribe: You may be exempt from the tax penalty if you are a member of an Indian Tribe that is federally recognized.
- You experienced general hardship: You could be exempt if you experienced circumstances that did not allow you to obtain qualified insurance, such as eviction, homelessness, foreclosure, unpaid medical bills, domestic violence or the death of a close family member.
- You are a member of a certain religious sect: You may be exempt from the tax penalty if you are a member of a certain religious sect or a healthcare sharing ministry.
Speak with a tax professional about the details of valid exemptions to determine whether an exemption may apply to your situation.
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The Fee For Not Having Health Insurance In 2022
There is no penalty for not having ACA mandated coverage in 2022 unless you live in a state like New Jersey or Massachusetts where it is mandated by the state. Because of this, short-term medical plans will be extremely popular in 2022 because they provide access to larger PPO networks at lower prices than ACA Bronze plans.
Individual Mandate Exemptions: Still Important If You Want A Catastrophic Plan
Although there is no longer a federal penalty for being uninsured, the process of obtaining a hardship exemption from the individual mandate is still important for some enrollees. If you’re 30 or older and want to buy a catastrophic health plan, you need a hardship exemption.
You can obtain the hardship exemption from the health insurance exchange , and you’ll need the exemption certificate in order to enroll in a catastrophic health plan. These plans are less expensive than bronze plans, although you can’t use premium subsidies to offset their cost, so they’re really only a good choice for people who don’t qualify for premium subsidies.
Although there is no longer a federal penalty associated with the individual mandate, you still need to obtain a hardship exemption from the mandate if you’re 30 or older and you want to buy a catastrophic health plan.
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What Is The Health Insurance Penalty
The penalty for no health insurance increases each year:
- In 2015, the penalty is the greater of $325 per adult and $162.50 per child, or 2% of your taxable household income minus the federal tax-filing threshold, which is the minimum income required by the IRS for someone to file an income tax return.
- In 2016, the penalty goes up to the greater of $695 per adult and $347.50 per child, or 2.5% of your taxable household income minus the federal tax-filing threshold.
- In 2017 and 2018, the penalty increases to the greater of $695 per adult and $347.50 per child, plus COLA , or 2.5% of your taxable household income minus the federal tax-filing threshold.
- In 2019, there will be no more penalty.
See chart below.
Why Have An Individual Mandate
These states have an individual mandate for the same reason the ACA originally did. Without an individual mandate, people would only buy insurance if they knew they were going to need it. Most often, this means the elderly and people with pre-existing conditions.
But those who use their health insurance the most are also the most expensive to insure. Before the Affordable Care Act, insurance companies would evaluate all applicants before enrolling them. Based on peoples age and medical history, the insurance companies would then deny them health care coverage, or charge them more for it. But the ACA made that kind of discrimination illegal. And then it took things one step further. An individual mandate is an incentive for everyone to get health insurance, even healthy people. That meant there was now a larger pool of people applying for health insurance. And with more healthy people getting health insurance, health insurance companies could lower premiums for everyone.
In other words, the individual mandate was meant to be one of the of cost-savings and consumer protections we associate with the ACA. It allows more people to be insured at a lesser rate per person. Even though there is no national individual mandate anymore, some states have passed their own mandates to help keep more people insured at lower costs per person. If the mandates help more people get insured, taxpayers in these states will have lower monthly premiums on average.
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Make Sure You Have Health Coverage
The mandate, which takes effect on January 1, 2020, requires Californians to have qualifying health insurance coverage throughout the year.
Many people already have qualifying health insurance coverage, including employer-sponsored plans, coverage purchased through Covered California or directly from insurers, Medicare, and most Medicaid plans.
Under the new mandate, those who fail to maintain qualifying health insurance coverage could face a financial penalty unless they qualify for an exemption.
Generally speaking, a taxpayer who fails to secure coverage will be subject to a penalty of $695 when they file their 2020 state income tax return in 2021. The penalty for a dependent child is half of what it would be for an adult.
The penalty is based on your state income and the number of people in your household.
Summary of possible penalties
To avoid a penalty, California residents need to have qualifying health insurance for themselves, their spouse or domestic partner, and their dependents for each month beginning on January 1, 2020.
The open enrollment period to sign up for health care coverage through Covered California is scheduled for October 15, 2019 through January 31, 2020.
Health Insurance: What To Expect When Filing Your Tax Return
Wondering whether you’ll owe a tax penalty for being uninsured? In most states, the answer is no. But if you’re in California, DC, Massachusetts, New Jersey, or Rhode Island, there is a penalty for being uninsured, which is assessed when you file your state tax return. Here’s an overview of how the individual mandate penalty has evolved over time:
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What Happens If You Dont Have Health Insurance
Over the past three years, the number of uninsured Americans has risen, growing from 26.7 million in 2016 to 28.9 million in 2019. During that same period, the rate of uninsured Americans increased from 10.0% in 2016 to 10.9% in 2019. Estimates for 2020 assume the number of uninsured Americans has risen to 30 million and this was before the covid 19 pandemic
If you find yourself in this group, you might be wondering what happens if you dont have health insurance. In fact, many people, asking themselves why health insurance is so expensive, wind up avoiding health insurance altogetherrunning the risk of facing crippling costs later on. Today, well discuss the risks and consequences of not having insurance, and what you can do if youre uninsured.
How The Penalty Worked
Your individual mandate tax is the greater of either 1) a flat-dollar amount based on the number of uninsured people in your household or 2) a percentage of your income .
This means wealthier households will wind up using the second formula, and may be impacted by the upper cap on the penalty. For example: for 2017, an individual earning less than $37,000 would pay just $695 while an individual earning $200,000 would pay a penalty equal to the national average cost of a bronze plan . This is because 2.5% of his income above the tax filing threshold would work out to about $4,740, which is higher than the national average cost of a bronze plan. The IRS publishes the national average cost of a bronze plan in August each year that amount is used to calculate penalty amounts when returns are filed the following year.
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How To Get Enrolled
Whether you live in a state with an individual mandate or not, you can get the coverage you need during Open Enrollment. The annual Open Enrollment Period is the time when all eligible Americans can shop the Health Insurance Marketplace. There, you can pick an Affordable Care Act-compliant health plan for 2020. Getting an Obamacare health insurance plan means knows you are getting care that meets certain standards. And this is in terms of both level of coverage and consumer protections. Also, when you shop the Marketplace for health insurance, youll also see what kinds of subsidies you qualify for to make that coverage more affordable. These subsidies are based on household income, and they can be very significantpeople who enroll on HealthSherpa pay an average of $47/month, and 94% of people qualified for subsidies during 2020s Open Enrollment. You can also see if you qualify for Medicaid or Medicare on HealthSherpa.
Ready to get started? Shopping the Marketplace with HealthSherpa is streamlined and straightforward. Plus our Consumer Advocate Team is on-hand to help each step along the way at .
What If I Dont Enroll In Health Insurance At All
As of 2019, theres no more individual mandate. This means you dont have to enroll in health insurance to avoid paying a penalty fee, in most states.
If youre 30 or older and want to enroll in a Catastrophic plan, you must claim a hardship exemption to qualify. Catastrophic health plans offer more affordable coverage. And they can protect you from high medical costs if youre seriously hurt or injured. If youre under 30, you can enroll in a Catastrophic plan without any kind of exemption, though. For people over 30, youll need to qualify for a hardship or affordability exemption. Some examples of hardship exemptions are homelessness, domestic violence, the death of a family, or experiencing a fire or other natural disaster. Once granted an exemption, you can see every Catastrophic plan available based on where you live on the Marketplace.
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How Can I Avoid The Individual Mandate Tax
Its easy to find affordable health insurance and the penalty for not having any is often not that much less than having the peace of mind that you have a cap on your medical bills. If you are suddenly injured or if you fall ill, the cost of not having any coverage can be devastating. Medical bankruptcy is a serious problem that plagues many Americans.
Its a good idea to compare health insurance quotes if youre interested in purchasing a plan to avoid fines next tax season. We can help. If you missed Open Enrollment, you may have a qualifying event that makes you eligible to apply past the deadline.
About the Author
Fran Majidi manages content on SmartFinancial’s website. She’s had nearly a decade’s worth of experience writing about insurance-related topics. Prior, she was an arts and entertainment editor in New York City. She has a B.A. from Barnard College and an M.F.A. in writing from The New School. She writes books under her given name, Afarin Majidi.
State Individual Mandate Penalties
With the elimination of the federal individual mandate penalty, some states have implemented their own mandates and penalties:
- Massachusetts already had a mandate and penalty, which has been in place since 2006. The state had not been assessing the penalty on people for whom the federal penalty applied, but started assessing the penalty again as of 2019.
- New Jersey implemented an individual mandate and an associated penalty starting in 2019.
- The District of Columbia also implemented an individual mandate and associated penalty as of 2019.
- Rhode Island created an individual mandate and associated penalty as of 2020.
- California created an individual mandate and associated penalty as of 2020.
Most of the states with individual mandates have modeled their penalties on the federal penalty that was used in 2018, which is $695 per uninsured adult , up to $2,085 per family, or 2.5% of household income above the tax filing threshold, although there are some state-to-state variations.
Vermont has an individual mandate as of 2020, but the state has not yet created any sort of penalty for non-compliance.
Maryland has created a program under which the state tax return asks about health insurance coverage, but instead of penalizing uninsured residents, the state is using the data in an effort to get these individuals enrolled in health coverage. Other states have since followed Maryland’s lead in creating an “easy enrollment” program.
Californians Without Health Insurance Will Pay A Penalty Or Not December 12 2019
What you need to know about Californias Individual Healthcare Mandate, including potential financial penalties, available exemptions and possible financial assistance.
The HEAL Team
Californians, be warned: A new state law could make you liable for a hefty tax penalty if you do not have health insurance next year and beyond.
But some of you need not worry: The law contains several exemptions that will allow certain people to avoid the penalty, among them prisoners, low-income residents and those living abroad.
It will be really important that people get clear guidance and instruction to make sure they dont inadvertently pay a penalty when they are eligible for an exemption, says Laurel Lucia, director of the Health Care Program at the University of California-Berkeleys Center for Labor Research and Education.
The Golden State will join Massachusetts, New Jersey, Rhode Island, Vermont and Washington, D.C., in requiring their residents to have health coverage and dinging those without it.
Most types of insurance, including Medi-Cal, Medicare and employer-sponsored coverage, will satisfy Californias coverage requirement. People who purchase insurance for themselves and their families, either through Covered California, the states health insurance exchange, or the open market, will have until Jan. 31 to buy a health plan for 2020.
How you claim an exemption depends on the type you are seeking.
What Are My Options For Complying With Obamacare
You have 3 options and two of them involve a penalty:
- Get no insurance and pay a penalty for no health insurance at tax time.
- Get cheap insurance and pay a penalty at tax time.
- Enroll in a qualified health plan. This option does not have to be through Covered California to avoid the penalty, but it does have to be a Covered California plan in order to qualify for a government subsidy.
- Enroll in a Health Care Sharing Plan, which is exempt from the penalty and my offer lower premiums than traditional health insurance.
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I Just Cant Afford Insurance Options What Can I Do
Find out if you qualify for Medicaid. Medicaid is a state-based assistance program for people under the age of 65. Patients usually pay no part of costs for covered medical expenses, although a small copayment may be required.
Each state sets its own guidelines regarding eligibility and services so you should contact your local Medicaid office directly.