How Tax Penalty Works

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What is the Tax Penalty for not having Health Insurance?

As of January 1, 2020, the state of California will require California residents to maintain minimum essential coverage (MEC) or pay a penalty. The annual penalty is 2.5% of household income or a per person charge, whichever is higher. The per person penalty will be $695 per adult and $347.50 per child (under the age of 18). The per person penalty amounts will be adjusted annually for inflation. The penalty cannot exceed the cost of the state average premium for the bronze level coverage offered through Covered Calfornia for the applicable household size or 300% of the per person charge, whichever is lower. For more details, please reference pages 6 & 7 of the FTB bill analysis.

How is the Tax Penalty calculated if I only had Health Insurance for part of the year?

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 $7.92 for each month of 2014, $28.75 for each month of 2015, and $57.92 for each month of 2016, when fully phased in.

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.

Am I eligible for an exemption from the Tax Penalty?

Individuals who are not required to file California income taxes will not be subject to this penalty. Additional exemptions apply to the following individuals for any month in which they fail to maintain MEC:

  • Individuals who obtain a hardship exemption from Covered California
  • Members of certain religious sects who obtain a religious-conscience certificate of exemption
  • Health care sharing ministry members
  • Incarcerated individuals
  • Non-US citizens or nationals who are not lawfully present in the US
  • Tribal members
  • Certain expatriates
  • Residents of another US state or US possession
  • Individuals enrolled in limited-scope coverage under Medi-Cal or other similar programs

California Residents who don’t fall into one of these categories may still avoid a penalty if their coverage lapse lasts less than three months. However, if the lack of coverage lasts longer, they will face a penalty for the full duration of the lapse.