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California Health Insurance Tax Penalty

Understanding California's individual mandate and how to avoid tax penalties for being uninsured.

What is the California Individual Mandate?

The California Individual Mandate requires most California residents to have qualifying health insurance coverage throughout the year. If you don't have coverage, you may have to pay a penalty when you file your California state income tax return.

Background

  • The federal penalty ended in 2019
  • California implemented its own mandate starting in 2020
  • Similar to the former federal Affordable Care Act penalty
  • Penalties go to fund health insurance subsidies in California

Minimum Essential Coverage includes:

  • Employer-sponsored insurance
  • Covered California plans
  • Medicare (Parts A, C, or both)
  • Most Medicaid coverage (Medi-Cal)
  • TRICARE
  • Veterans health care programs

How Much is the Penalty?

The penalty is calculated two ways, and you pay whichever amount is higher:

Percentage Method

2.5%

of your household income above the California filing threshold

Maximum: Average annual premium for Bronze plan in California

Flat Fee Method

2024 amounts:

  • $900 per adult
  • $450 per child (under 18)
  • Maximum: $2,700 per family
Months Without Coverage Penalty Percentage
1-2 months 0% (Short gap exemption)
3 months 25% of annual penalty
6 months 50% of annual penalty
9 months 75% of annual penalty
12 months 100% of annual penalty

Who Has to Pay the Penalty?

You may owe a penalty if you meet ALL of these conditions:

Parents Are Responsible

Parents or guardians are responsible for ensuring their dependents have coverage and for paying any penalties for uninsured children.

Exemptions from the Penalty

You may qualify for an exemption if any of these apply:

The lowest-cost Bronze plan (after subsidies) costs more than 8.24% of your household income (2024 threshold).

  • Household income below California's filing threshold
  • Would qualify for Medi-Cal but live in a county that doesn't participate

  • Homelessness
  • Eviction or foreclosure
  • Domestic violence
  • Death of a close family member
  • Natural disaster
  • Bankruptcy
  • Substantial medical debt

  • Religious conscience objection
  • Health care sharing ministry member
  • Incarcerated
  • Not a U.S. citizen or national
  • Member of federally recognized tribe
  • Gap in coverage less than 3 consecutive months

How to Avoid the Penalty

Get Covered!

The simplest way to avoid the penalty is to get health insurance:

  • Through Covered California
  • Through your employer
  • Directly from an insurance company
  • Through Medi-Cal if eligible

Important Deadlines

  • Open Enrollment: Nov 1 - Jan 31
  • Coverage by Jan 1: Enroll by Dec 15
  • Special Enrollment: 60 days after qualifying event
  • Medi-Cal: Apply any time

Cost Comparison

Consider this: The average Bronze plan costs about $100-200/month after subsidies, while the penalty can be $75+ per month with NO coverage!

Bottom line: Health insurance often costs nearly the same as the penalty, but you get actual coverage.

Reporting Coverage When Filing Taxes

1

Receive Form 1095

You'll receive Form 1095-A (Covered California), 1095-B (insurance company), or 1095-C (employer) showing your coverage.

2

File California Tax Return

Use Form 540 and include Form FTB 3853 (Health Coverage Exemptions and Individual Shared Responsibility Penalty).

3

Report Coverage or Exemption

Check the box if you had full-year coverage, or complete Form 3853 if you had partial coverage or qualify for an exemption.

4

Pay Any Penalty

If you owe a penalty, it's added to your tax bill or subtracted from your refund.

Related Forms & Documents:

Don't Pay the Penalty - Get Covered Instead!

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