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What Is The Tax Penalty For No Health Insurance

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Why Do I Have An Insurance Penalty In 2021

No more penalty for lack of health care coverage during tax season

Posted: October 23, 2020

If you are a Californian with no health insurance in 2020, you may face a tax penalty in 2021. Though in 2019 the Trump administration rescinded the tax penalty established by the Affordable Care Act, you may still need to pay a tax penalty in 2021 if you live in California and do not have health insurance.

Your options are either to not carry health insurance and pay a penalty at tax time or to enroll in a qualified insurance plan and avoid paying the penalty, though some exceptions may apply depending on your circumstances.

A $10000 Obamacare Penalty Doubtful

By Victoria KnightOctober 29, 2020

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Penalty Or No Penalty For Being Uninsured

During the formative stage of the Affordable Care Act in 2014, lawmakers had at the back of their minds how essential it would be to get healthy people enrolled in coverage. This is because insurance only works if there are enough low-cost enrollees to balance out the sicker, higher-cost enrollees.

Hence the law was made to include an individual mandate, otherwise known as the shared responsibility provision. And according to this controversial provision, people who didnt have minimum essential coverage would be subject to a tax penalty unless they were exempt from the shared responsibility provision.

However, that tax penalty was repealed after the end of 2018, under the terms of the Tax Cuts and Jobs Act of 2017. Technically, the individual mandate itself is still in effect, but theres no longer a penalty to enforce it.

The continued existence of the mandate but without the penalty is the crux of the Carlofornia v. Texas lawsuit, which saw 18 states challenging the constitutionality of the mandate without the penalty, and arguing that the entire ACA should be overturned if the mandate is unconstitutional.

The Trump administration agreed and overturned the ACA after a judge ruled in December 2018. There was an appeal to the Fifth Circuit and oral arguments were heard in July 2019.

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A Couple More Things To Know About Obamacare Tax Penalty:

If you are subject to the tax penalty but were insured with an Obamacare health insurance plan for a part of the year, your Obamacare tax penalty can be prorated based on how much of the year you were without coverage. For example, if you only had Obamacare health insurance from January through June , then you would only pay 50% of the Obamacare tax penalty.

While no one likes paying a penalty, some people decide to pay the Obamacare penalty and sign up for short-term or accident and critical illness coverage rather than purchase Obamacare-compliant coverage. In some cases, taking the penalty and signing up for a short-term plan could be less costly, but purchasing a plan that is not approved by the Affordable Care Act may not provide you with the coverage you really need if you become ill or need to be hospitalized.

How To Avoid The Penalty And Afford Insurance

Penalty for No Health Insurance 2020 in California

You are no longer subject to a penalty for not having insurance, a provision of the Affordable Care Act that was struck down by a judge. However, insurance can help you access health care services and avoid major medical bills.

f paying for insurance is a struggle for you, you may be able to get help from the government. This money is called a subsidy. To get it:

  • You must enroll in a private insurance plan through your state’s .
  • The amount you make each year must meet certain rules. The good news is that some financial support may be available even if you are in a middle-income range.
  • For instance, you’ll likely be able to get money if you make up to about $50,000 a year for one person or about $103,000 for a family of four. These income amounts are based on the federal poverty guidelines and will change every year.

    How much financial help you get depends on how much money you make a year. The less you make, the more help you get.

    There are two subsidies available. They immediately lower your costs. You donât have to pay first and get the money later.

  • Tax credit. A tax credit can help pay for your monthly insurance payments, called the premium. The credit can immediately lower your costs. You donât have to pay first and get the money later.
  • Cost-sharing subsidy. If you qualify, you will pay less when you get health care or buy medicine because your deductibles, copays, and coinsurance will be lower.
  • Show Sources

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    What Is An Exemption From The Tax Penalty

    The tax penalty is assessed for each month that a person is not covered. It is pro-rated, so that a person who is not covered for only a single month would pay 1/12th of the tax that would be due for the full year. For example, the minimum tax per person for failing to get coverage would be $57.92 per adult and $28.96 per child for each month of 2020.

    What Is The Obamacare Tax Penalty

    Briefly, the Obamacare law requires most Americans to have health insurance that meets specific coverage criteria. If you have a gap of more than two consecutive months in a single year with no qualifying health insurance coverage, you may be subject to the Obamacare tax penalty.

    The dollar value of your tax penalty for not having health insurance may vary depending on your personal circumstances. The Obamacare tax penalty is calculated either as a percentage of your taxable household income, or as a set dollar amount per person. If youre subject to the tax penalty , you will be required to pay the larger of the two amounts.

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    California Has Its Own Affordable Care Act Tax Penalty

    • Not all states have expanded Medicaid coverage under the Affordable Care Act. Learn where California stands.
    • The Affordable Care Act tax penalty has been set to zero, but some states have enacted their own health insurance requirements.
    • If you miss the Affordable Care Act deadline in California, you may still be able to get covered.
    • Three ways California residents can reduce the costs of health care coverage under the Affordable Care Act .
    • Four ways students who need health insurance can get covered under the Affordable Care Act .
    • When you have homes in two different states, it may be tricky to decide if you need one health plan or two.

    Effects On Insurance Premiums

    âWill there be tax penalty for not having health insurance?â

    The elimination of the individual mandate penalty in 2019 contributed to higher individual market premiums for 2019, because insurers expected that the people likely to drop their coverage after the penalty was eliminated would be healthy, whereas sick people will tend to keep their coverage regardless of whether there’s a penalty for being uninsured.

    The penalty’s original purpose was to encourage healthy people to join the risk pool, as a balanced risk pool is necessary for any health insurance product to function.

    According to rate filings for 2019 plans, average premiums would have for 2019 if the individual mandate penalty had remained in place .

    The primary reason average premiums increased instead of decreasing for 2019 was the elimination of the individual mandate penalty, along with the Trump administration’s efforts to expand access to short-term health plans and association health plans.

    Those plans appeal to healthier individuals, so their expansion has the same effect as the penalty repeal, in terms of reducing the number of healthy people who maintain ACA-compliant individual market coverage. Note that although average benchmarkpremiums decreased slightly in 2019, overall average premiums did increase that year.

    But because the ACA’s premium subsidies adjust to keep coverage affordable even when premiums increase, the majority of people who buy health plans in the exchanges have continued to do so.

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    How To Look Up Plan Premiums

    1. Open MNsure’s plan comparison tool — on the first page, click the Continue button.

    2. Under “Which Coverage Year” select the year for which you are seeking information. Note: if you pick a year prior to the current coverage year, a date picker will appear. Enter the start Date for your exemption.

    43. Under “Where do you live” enter the ZIP Code of your residential address. Your county of residence will appear. If there is more than one county for your ZIP code, select your county of residence.

    4. Under Who is in your household and do they need coverage?” enter the following information for each person in your household applying for the exemption:

    • Birthdate
    • Tobacco Use. If you use tobacco, you need to enter your household information two separate times in order to search for the correct premium using the correct Tobacco Use status. To get the lowest cost bronze plan premium: check the box to indicate “Yes” for Tobacco Use. To get the second-lowest cost silver plan premium: leave the checkbox unchecked to indicate “No” for Tobacco Use.
    • Leave Native American, and Pregnant? checkboxes unchecked as these cannot be used in this premium calculation.
    • Make sure the Needs Coverage checkbox is checked.

    5. Skip the financial help section and click Browse Plans button on bottom right.

    6. Skip the Tell Us about Your Health Care Needs page and select Skip to View Plans button.

    7. Under the “Health Plans” tab, the medical plans available to you will display.

    No Longer A Federal Penalty But Some States Impose A Penalty On Residents Who Are Uninsured

    Although there is no longer an individual mandate penalty or Obamacare penalty at the federal level, some states have implemented their own individual mandates and associated penalties:

    Vermont enacted legislation to create an individual mandate as of 2020, but lawmakers failed to agree on a penalty for non-compliance, so although the mandate took effect in 2020, it has thus far been essentially toothless . Vermont could impose a penalty during a future legislative session, but the most recent legislation the state has enacted calls for the state to use the individual mandate information that tax filers report on their tax returns to identify uninsured residents and provide targeted outreach to help them obtain affordable health coverage.

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    Enroll In A Qualified Health Plan

    Enrolling in a qualified health insurance plan is the best way to avoid penalties at tax time. Individuals have the option to purchase short-term health insurance or to sign up for a policy if they have a qualifying life event. Penalties will be reduced for each month that a person has insurance as they are calculated on a month-to-month basis. The more months that a person goes without health insurance, the higher the penalty.

    Individuals who have health insurance should start preparing now for the 2021 tax season by gathering their health insurance coverage documents, such as Forms 1095-A, 1095-B, or 1095-C, which should arrive in the mail. Employees who receive healthcare coverage from their employer should receive a statement that indicates that they were covered for part of the year or the whole year.

    How To Apply For An Exemption For 2018 And Earlier

    2017 Health Insurance Penalty

    Depending on the type of exemption you qualify for, you will need to submit an application to or request the exemption from the Internal Revenue Service when you file your taxes. .

    • Federal Health Insurance Marketplace : Go to to determine which exemption to request. Print out, complete and mail the federal Application for Exemption. The completed form and any supporting documents should be mailed to:Health Insurance Marketplace – Exemption Processing465 Industrial Blvd.London, KY 40741
    • IRS: Information for claiming an exemption through the IRS when you file your taxes can be found at

    MNsure uses the federal Health Insurance Marketplace to process exemption applications. The federal government will notify you if you qualify for an exemption. If you apply to and qualify, you will receive an exemption certificate number that you’ll need for your federal income tax return you file for the year of the exemption. For questions about the status of your application or your eligibility for an exemption, visit, or call the Health Insurance Marketplace Help Center at 800-318-2596. TTY users should call 855-889-4325. If you have questions about how to get a copy of and where to submit the application form, call the MNsure Contact Center at 855-366-7873 or 651-539-2099.

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    Are You Exempt From Health Care Coverage


    The Affordable Care Act, or Obamacare, is an individual mandate that requires all eligible Americans to have some form of basic health coverage. For tax years prior to 2019, those without insurance will receive a penalty when they file their tax returns – that is, unless they have an exemption.

    The 2017 Tax Reform Legislation passed by congress eliminates the penalty for not have health insurance beginning with the 2019 tax year. However, for years prior to 2019, you will need to have health insurance, have an exemption to the requirement, or pay a penalty.

    Ri Health Insurance Mandate

    Health insurance is a requirement in the state of Rhode Island.If you go without continuous health coverage, you might pay a penalty when you file your taxes in 2021. See below for more information about the health insurance mandate and how it might affect you.

    Better yet, sign up for coverage through HealthSource RI today to avoid a tax penalty later.

    COVID-19 Hardship ExemptionIf you are looking for more information about exemptions from the penalty fee, please see the exemptions section below. Additionally, the State of Rhode Island recognizes that the COVID-19 pandemic has brought about unusual and unanticipated circumstances for many individuals. As a result, HealthSource RI filed a regulation expanding its criteria for qualification for the Hardship Exemption to include a COVID HARDSHIP, which can be claimed on an individuals RI Personal Income Tax return by using code 19. Filers who may claim this exemption DO NOT need to file an exemption application with HealthSource RI.

    This exemption is valid for use ONLY for the months of April 2020 through December 2020 and may be claimed directly if the taxpayer attests that, due to a direct impact of the COVID-19 pandemic, the following statements are true:

    1) The individual lost minimum essential coverage during the 2020 calendar year, and

    2) The individual suffered a hardship with respect to the capability to obtain minimum essential coverage during the subsequent months in the 2020 year.

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    Individual Mandate Penalty Repeal

    Former President Trump campaigned on a promise to repeal the ACA and replace it with something else. Republicans in the House passed the American Health Care Act in 2017 but the legislation failed in the Senate, despite repeated attempts by GOP Senators to pass it.

    Ultimately, Republican lawmakers passed the Tax Cuts and Jobs Act and President Trump signed it into law in December 2017. Although the tax bill left the rest of the ACA intact, it repealed the individual mandate penalty, as of 2019 .

    Although Congress did not repeal anything other than the mandate penalty , a lawsuit was soon filed by a group of GOP-led states, arguing that without the penalty, the mandate itself was unconstitutional.

    They also argued that the mandate was not severable from the rest of the ACA, and so the entire ACA should be declared unconstitutional. A federal judge agreed with them in late 2018.

    An appeals court panel agreed in late 2019 that the individual mandate is not constitutional, but sent the case back to the lower court for them to decide which provisions of the ACA should be overturned.

    The case ultimately ended up at the Supreme Court, where the justices ruled in favor of the ACA. So although there is still no federal penalty for being uninsured, the rest of the ACA has been upheld by the Supreme Court .

    Will My Current Aca Health Insurance Plan Automatically Renew

    What is the Affordable Care Act Individual Mandate (Obamacare)? — TurboTax Tax Tip Video

    If you are already enrolled in a health insurance plan through your stateââ¬â¢s Marketplace, your plan will automatically renew if available for the following year. Those who live in Maine, Kentucky, and New Mexico will need to claim their new accounts as those states transition away from, but auto-renewal is an option for all other enrollees.

    Even if you are satisfied with your current plan, auto-renewal is not always the best option. During open enrollment, you should shop around to see if a health insurance plan better suits your needs for three main reasons.

  • You are Locked In. If you do not change your current plan, you will be automatically enrolled in the same plan on the last day of open enrollment . This means you will not have a chance to change your mind later.
  • Subsidies Change Year to Year. Another thing to consider is the amount of your subsidy. Subsidies change year to year, which could result in a higher premium for you and your family. If you browse around for other plans, you could save a substantial amount of money.
  • If your plan is discontinued, auto-renewal will result in the exchange or your insurer picking a new plan. There is no guarantee you will be enrolled in a similar plan as the one you were previously enrolled in. They will try to assign you the closest plan, but again, there is no guarantee.
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