Orlando Harmon
If you live in the United States and don't have health insurance, you might be wondering if you need to pay a penalty. The good news is that, since 2018, there is no longer a tax penalty for lacking health coverage. However, if you're 30 or older and want to enroll in a Catastrophic health plan, you'll need to apply for an exemption. This type of plan offers lower-priced coverage that protects you from high medical costs in the event of a serious injury or illness. You can also apply for an exemption if you meet certain criteria, such as financial hardship, homelessness, eviction, or unaffordable coverage options. These exemptions can be claimed on your state income tax return or through a separate application process, depending on the state and your specific circumstances.
Characteristics of Medical Insurance Penalty Exemption
| Characteristics | Values |
|---|---|
| Fee for not having health insurance | Ended in 2018 |
| No longer pay a tax penalty for not having health coverage | N/A |
| Need exemption if 30 or older and want to enroll in a "Catastrophic" health plan | Submit an application and get an Exemption Certificate Number (ECN) |
| Types of exemptions | Affordability and hardship |
| Qualify for exemption if | Financial hardship or other circumstances that prevented you from getting health insurance |
| Hardship exemptions | Cover the month before the hardship, the months of the hardship, and the month after the hardship |
| States with their own exemption processes | California, District of Columbia, and Maryland |
| Get an exemption from the requirement to have coverage | Penalty for not having coverage the entire year will be at least $900 per adult and $450 per dependent child under 18 |
| Avoid a penalty | Need minimum essential coverage (MEC) for each month of the year |
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What You'll Learn
No longer pay a tax penalty for not having health coverage
If you don't have health insurance, you may be wondering how to avoid paying a tax penalty. The good news is that, as of 2018, there is no longer a fee or tax penalty for not having health coverage. This means that you don't need an exemption to avoid paying a penalty at tax time.
However, if you're considering enrolling in a "Catastrophic" health plan, you may need to apply for an exemption. A Catastrophic health plan is a type of low-priced coverage that protects you from high medical costs in the event of a serious injury or illness. If you're 30 or older and want to enroll in this type of plan, you'll need to submit an application for an exemption and obtain an Exemption Certificate Number (ECN). On the other hand, if you're under 30, you can enroll in a Catastrophic plan without needing an exemption.
There are two main types of exemptions: affordability and hardship. You may qualify for an affordability exemption if the lowest-priced coverage available to you through a Marketplace or job-based plan would cost more than a certain percentage of your household income. Hardship exemptions, on the other hand, are granted when individuals face financial or other challenges that prevent them from obtaining health insurance. Examples of hardships include homelessness, eviction, utility shut-off, domestic violence, death of a family member, natural disasters, bankruptcy, unexpected medical debt, and caring for a dependent family member.
It's important to note that exemption requirements may vary depending on your state. For example, if you live in California, you can apply for an exemption through Covered California. Similarly, residents of the District of Columbia can visit DC Health Link, and those in Maryland can refer to the Maryland Health Connection for information on exemptions. Be sure to check with your state or a tax preparer to understand the specific requirements and processes applicable to you.
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Apply for a health coverage exemption
Since 2018, there is no longer a tax penalty for not having health insurance. However, if you are 30 or older and want to enrol in a "Catastrophic" health plan, you will need to apply for an exemption. A Catastrophic health plan is a lower-priced coverage option that primarily protects you from high medical costs in the event of a serious injury.
There are two types of exemptions: affordability and hardship. To qualify for an exemption based on affordability, the lowest-priced coverage available to you through a Marketplace or job-based plan must exceed 7.97% of your household income.
To qualify for a hardship exemption, you must have experienced financial hardship or other circumstances that prevented you from obtaining health insurance. Examples of qualifying circumstances include homelessness, eviction, utility shut-off notices, domestic violence, the death of a family member, natural disasters, bankruptcy, substantial medical debt, and unexpected increases in necessary expenses due to caring for a dependent family member.
To apply for a health coverage exemption, you can visit the HealthCare.gov website or the website for your specific state. Some states, such as California, the District of Columbia, and Maryland, have their own exemption processes and websites. You will need to submit an application form and any required documentation to support your claim. Once your application is reviewed, you will receive a notice regarding your exemption eligibility. If your exemption is approved, you will be provided with an Exemption Certificate Number (ECN) to enrol in the Catastrophic health plan.
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Affordability and hardship exemptions
Since 2018, there is no longer a tax penalty for not having health insurance. However, if you are 30 or older and want to enrol in a "Catastrophic" health plan, you will need an exemption. A Catastrophic health plan is a lower-priced coverage option that protects you from high medical costs in the event of a serious injury or illness.
There are two types of exemptions: affordability and hardship. To qualify for an affordability exemption, the lowest-priced coverage available to you through a Marketplace or job-based plan must cost more than 7.97% of your household income (as of 2024; this figure was 8.17% for 2023 and will be 7.28% for 2025). If you want an affordability exemption for the entire calendar year, you must request it before January 1 of that year. If you need this exemption for previous months, you can apply for it when you file your tax return.
You can also qualify for an exemption if you experienced financial hardship or other circumstances that prevented you from getting health insurance. This includes situations such as homelessness, eviction or foreclosure, a utility shut-off notice, domestic violence, the death of a family member, natural or human-caused disasters, bankruptcy, substantial medical debt, or unexpected increases in necessary expenses due to caring for a family member. Hardship exemptions typically cover the month before, the months of, and the month after the hardship. However, in some cases, exemptions may be granted for additional months or even a full calendar year.
To apply for an exemption, you may need to submit an application and receive an Exemption Certificate Number (ECN) to enrol in a Catastrophic health plan. In some states, you can apply for exemptions through Covered California, DC Health Link, or state-specific websites and programmes.
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State-specific exemption processes
Since 2018, there is no longer a tax penalty for not having health insurance. However, some states have their own exemption processes. Here is a detailed overview of the state-specific exemption processes for California, Massachusetts, and Maryland.
California
California residents can apply for an exemption through Covered California. Some exemptions require an exemption application, while others can be claimed when filing your state tax return. Exemptions that require an application include circumstances where the cost of the lowest-cost Bronze plan through Covered California or the lowest-cost employer-sponsored employee-only plan is more than 8.17% of an individual's income for the 2023 tax year. Exemptions that can be claimed on your state tax return include having an income below the state tax filing threshold and a short coverage gap of three consecutive months or fewer.
Massachusetts
Massachusetts requires residents to maintain a minimum level of health insurance coverage, known as "creditable coverage," or face a penalty. The state provides several pathways for individuals to seek exemptions from the health insurance mandate, including financial hardship, religious beliefs, and short coverage gaps. Financial hardship exemptions may be granted if the cost of insurance exceeds a specified percentage of an individual's income, which is determined annually by the Massachusetts Health Connector. Religious exemptions are allowed for individuals who are members of recognized religious sects that oppose insurance benefits. Exemptions are also granted for incarcerated individuals and residents not lawfully present in the United States.
Maryland
Maryland residents can visit the Maryland Health Connection website to learn about exemptions and how to apply.
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Exemption Certificate Number (ECN)
The fee for not having health insurance ended in 2018, meaning you no longer pay a tax penalty for not having health coverage. If you don't have health coverage, you don't need an exemption to avoid paying a penalty at tax time. However, you need an exemption if you're 30 or older and want to enroll in a "Catastrophic" health plan. A Catastrophic health plan offers lower-priced coverage that mainly protects you from high medical costs if you get seriously hurt or injured.
To obtain an Exemption Certificate Number (ECN), you must first apply for an exemption. You can qualify for this exemption if you had a financial hardship or other circumstances that prevented you from getting health insurance. Examples of this include eviction or foreclosure, a utility shut-off notice, domestic violence, the death of a family member, or a natural disaster that caused substantial damage to your property.
Once you have obtained your ECN from HealthCare.Gov or Covered California, you can enter this information into TurboTax to waive the tax penalty. If you applied for an exemption through a Health Insurance Marketplace but haven’t heard back yet, you can get a preliminary waiver of the tax penalty and file your taxes without the penalty being taken out.
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Frequently asked questions
No, you don't. The fee for not having health insurance ended in 2018.
No, you don't need an exemption to avoid paying a penalty. However, if you're 30 or older and want to enroll in a "Catastrophic" health plan, you will need to apply for an exemption.
There are two types of exemptions: Affordability and hardship. You can qualify for an exemption if the lowest-priced coverage available to you would cost more than a certain percentage of your household income.
You can apply for an exemption through Covered California. You will need to submit an application and get an Exemption Certificate Number (ECN) to enroll in a health plan.
Examples of hardships include financial difficulties, homelessness, eviction, domestic violence, death of a family member, natural disasters, bankruptcy, unexpected medical expenses, and more.
