Jane Dotson
The Affordable Care Act (ACA) previously required taxpayers to have health insurance, or they would face a penalty known as the individual responsibility payment. This penalty was repealed by the Tax Cuts and Jobs Act (TCJA) in 2019, and since then, there has been no IRS penalty for not having health insurance at the federal level. However, some states like California, Massachusetts, New Jersey, and the District of Columbia have implemented their own health coverage requirements with penalties for non-compliance, assessed via state tax returns. These penalties are typically based on a flat rate per adult and child or a percentage of income, whichever is higher. While the IRS no longer penalizes individuals for canceling their medical insurance, it's important to be aware of the specific regulations and potential penalties that may exist in your state of residence.
| Characteristics | Values |
|---|---|
| Penalty for not having health insurance | The penalty was eliminated starting with the 2019 tax year. |
| Tax years without health insurance | 2014-2018 |
| Fee calculation | Flat rate or a percentage of annual household income, whichever is higher |
| Fee for 2014 | $95 per uninsured adult and $47.50 per uninsured child under 18 |
| Fee for 2023 | $900 per adult and $450 per dependent child under 18 |
| State-level penalties | Implemented in Massachusetts, the District of Columbia, and New Jersey |
| Exemption | If you don't have health coverage, you don't need an exemption to avoid paying a penalty |
| Cancellation grace period | 30 days to make good on unpaid premiums before policies can be cancelled |
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What You'll Learn
- The federal tax penalty for not having health insurance was eliminated after 2018
- Some states have their own penalties for residents without health coverage
- The penalty amount is based on income and health plan costs
- Exemptions are available for those who qualify
- The fee was calculated as a flat rate or a percentage of income
The federal tax penalty for not having health insurance was eliminated after 2018
The Affordable Care Act (ACA) mandated that taxpayers have health insurance for certain tax years. This mandate was in effect from 2014 through 2018. If an individual did not have health insurance during this period, they were required to pay a non-insurance penalty unless they qualified for an exemption. The penalty was either a flat rate or a percentage of the individual's annual household income, whichever was higher. For 2014, the penalty was set at 1% of income or $95 per uninsured adult and $47.50 per uninsured child under 18, whichever amount was higher.
However, starting with the 2019 tax year, the federal tax penalty for not having health insurance was eliminated under the Tax Cuts and Jobs Act of 2017. While the requirement to have minimum essential coverage still technically remains, there is no longer a federal penalty for non-compliance. This means that individuals who do not have health coverage no longer need to apply for an exemption to avoid paying a tax penalty.
It is important to note that some states have implemented their own health coverage requirements with penalties. These penalties are assessed via the state tax return for residents who do not maintain coverage. For example, Massachusetts has had an individual mandate and penalty in place since 2006, and the penalty amount is based on the person's income and the cost of health plans available via the Massachusetts health insurance exchange. The District of Columbia and New Jersey also implemented individual mandates and penalties that took effect in January 2019, with penalty amounts mirroring the previous federal penalty. Therefore, while there is no longer a federal tax penalty for not having health insurance after 2018, individuals should check the requirements and potential penalties for their specific state.
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Some states have their own penalties for residents without health coverage
The federal government repealed the health coverage requirement and penalty, known as the "individual mandate", in 2018. This means that, as of 2018, there is no longer a federal tax penalty for not having health insurance. However, some states have their own mandates and penalties for residents without health coverage.
Five states and the District of Columbia have created their own individual mandates with associated penalties. These states include New Jersey, California, Rhode Island, Massachusetts, and the District of Columbia. Vermont also recommends that residents have health coverage, but there is no penalty for noncompliance.
The penalty amount varies by state and can be based on income, family size, and duration without coverage. For example, in California, the penalty for not having coverage for the entire year in 2023 is either $900 per adult and $450 per dependent child or 2.5% of gross income above the state filing threshold, whichever is higher. Rhode Island's penalty for the 2023 tax year is calculated in a similar way, with residents paying the higher amount of either 2.5% of their annual household income or $695 per person and $347.50 per child under 18.
Penalty exemptions are available in some states for certain circumstances, such as lack of affordable coverage options, short coverage gaps, financial hardship, incarceration, or living abroad. Residents can apply for these exemptions to avoid paying the penalty.
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The penalty amount is based on income and health plan costs
The penalty for not having health insurance was scrapped starting with the 2019 tax year. However, the requirement to have minimum essential coverage is still in place. While the IRS is not penalizing people who are uninsured in 2019 and beyond, some states have implemented their own health coverage requirements, with penalties for non-compliance. These penalties are assessed via state tax returns.
Massachusetts, for example, has had an individual mandate and penalty in place since 2006. The penalty amount is based on the person's income and the cost of health plans available via the Massachusetts health insurance exchange. The revenue generated from this penalty is used to subsidize Health Connector programs.
The District of Columbia and New Jersey also implemented individual mandates and penalties in January 2019. The penalty amounts are based on the federal penalty that was in place in 2018: a flat rate of $695 per adult, half of that for a child, or 2.5% of income, whichever is higher. However, the maximum penalty under the percentage of income calculation is based on the average cost of a bronze plan in DC or New Jersey, rather than the nationwide average.
It is worth noting that while the federal tax penalty for not having health insurance was eliminated after 2018, some states still require health coverage and will impose a fee if you don't have insurance (or an exemption) when filing your state taxes. Therefore, it is important to check with your specific state or a tax preparer to understand the requirements and potential penalties for not having health insurance.
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Exemptions are available for those who qualify
The penalty for not having health insurance was eliminated starting with the 2019 tax year. This means that, as of 2019, you no longer pay a tax penalty for not having health coverage and, therefore, do not need an exemption to avoid paying a tax penalty.
However, some states have their own exemption processes. For example, if you live in California, you may apply for an exemption through Covered California. If you live in Maryland, you can visit Maryland Health Connection for information on exemptions and how to apply. If you live in the District of Columbia, you can visit DC Health Link for more information.
Prior to 2019, exemptions were available for those who qualified. For the tax years between 2014 and 2018, if you qualified for health insurance but didn't meet the exemption requirements and chose to remain without coverage, the IRS assessed penalties through your tax return. You could be exempt from the health insurance requirement if the insurance was unaffordable, you had no tax filing requirement, experienced a hardship, had short coverage gaps, or were a member of certain exempt groups.
The penalty for not having coverage was calculated as either a flat rate or a percentage of your qualifying annual household income, whichever was higher. For 2014, the penalty was set at 1% of income or $95 per uninsured adult and $47.50 per uninsured child under 18 (whichever was higher). For 2023, the penalty for not having coverage the entire year will be at least $900 per adult and $450 per dependent child under 18 in the household when filing state income tax returns in 2024.
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The fee was calculated as a flat rate or a percentage of income
The penalty for not having health insurance was eliminated starting with the 2019 tax year. However, the requirement to have minimum essential coverage is still technically in effect. While the IRS is not penalizing people who are uninsured in 2019 and beyond, some states have implemented their own health coverage requirements with penalties. These penalties are assessed via the state tax return for residents who do not maintain coverage.
For tax years between 2014 and 2018, if you qualified for health insurance but did not meet the exemption requirements and chose to remain without coverage, the IRS assessed penalties through your tax return. This fee was calculated as either a flat rate or a percentage of your qualifying annual household income, whichever amount was higher. Like any other tax, it was deducted from your refund or added to your balance due.
For the 2014 tax year, the penalty was set at 1% of income or $95 per uninsured adult and $47.50 per uninsured child under 18, whichever was higher. The fee for not having health insurance was sometimes called the “Shared Responsibility Payment” or "mandate".
In Massachusetts, the penalty amount is based on the person's income and the cost of health plans available via the Massachusetts health insurance exchange. The penalty only applies to adults. Similarly, the District of Columbia and New Jersey implemented individual mandates and penalties that took effect in January 2019. The penalty amounts are based on the previous federal penalty of a flat rate per adult or child or a percentage of income, whichever is higher. However, the maximum penalty under the percentage of income calculation is based on the average cost of a bronze plan in each state.
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Frequently asked questions
The IRS no longer penalizes people for being uninsured. The penalty was eliminated after 2018, under the Tax Cuts and Jobs Act of 2017.
No, you do not need health insurance to file taxes. After the ACA penalty was repealed, taxpayers are no longer required to demonstrate that they have coverage or qualify for an exception.
The penalty was either a flat rate or a percentage of your qualifying annual household income, whichever was higher. The flat rate for 2014 was $95 per uninsured adult and $47.50 per uninsured child under 18.
Yes, some states have implemented their own health coverage requirements with penalties. These include Massachusetts, the District of Columbia, New Jersey, and California.
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