Tax Exemptions, Payments for No Health Insurance
Get the details: Affordable Care Act Overview
Is It Illegal to Not Have Health Insurance?
The federal government no longer legally requires individuals to have health insurance. In 2010, the Affordable Care Act (ACA), often referred to as Obamacare, was enacted which widened the availably of affordable health insurance, but mandated health coverage for all. This has since been removed and there is no federal penalty for not having health insurance.
However, certain states may mandate it and impose a penalty if you do not have health insurance. Most state penalties are equal to the federal rates which have since expired: 2.5% of income or $625 per uninsured adult. The following are the only states which require individuals to report health insurance coverage on their state tax return:
CA's penalty, known as the Individual Shared Responsibility Penalty or ISR Penalty, was enacted for 2020 Returns and has been in effect for 2021 and 2022 Taxes. This penalty can be avoided by filing your CA Form 540 and reporting your health insurance - eFileIT
on eFile.com and the tax app will walk you through adding your health insurance so you are not penalized. You may be able to avoid the penalty if you qualify for certain exemptions. The penalty is calculated based on the number of people in your household and your CA state income. This is $800 per uninsured adult and $400 per child or 2.5% of your household income that exceeds a set threshold (the state will use whichever penalty is higher).
If you are 18 or older and uninsured in MA or your plan does not meet Minimum Creditable Coverage or MCC standards, then you will be penalized on your state return. If you fail to meet these standards, you could face a penalty of up to $135 per month or $1,620 per year for individuals. The state should issue you a Form 1099-HC if your plan did not meet MCC standard to help you report it on your tax return. The penalty can be avoided by enrolling in a qualifying plan or meeting certain exemptions - for example, being under 150% of the Federal Poverty Level. Add your health insurance coverage when you file your federal and state taxes on eFile.com
Since 2019 and introduced by the New Jersey Health Insurance Market Protection Act of 2018, the state of NJ imposes a penalty equal to 2.5% of an individual's income or a flat rate of $625 per taxpayer for those who do not have health insurance or do not have a plan that meets the minimum essential coverage (MEC) requirement. The penalty can also be avoided by qualifying for a coverage exemption (for example, if you are not required to file a tax return, you do not need coverage). The penalty is called the Shared Responsibly Payment and is broken down into income and household size. Individuals will see a minimum penalty of $695 and maximum $3,492; these amounts increase when a spouse is added, dependents are added, and/or the household income is higher. Those making under $200,000 will see a smaller penalty; up to $400,000 is increased; anyone making over $400,000 will see the highest penalty. NJ residents will want to avoid the penalty by reporting their health insurance on their NJ-1040; on eFile.com
, you will be walked through adding this to your return.
Enacted in 2020, RI individuals without health insurance or those with plans that do not have minimum essential coverage may see a penalty when they file their state taxes. This state penalty is equal to 2.5% of household income or $695 per adult and $347.50 per child dependent under a18 years old, whichever is higher. RI residents without health insurance can avoid the penalty if they qualify for certain exemptions, such as a hardship exemption applied for through the state or if they are not required to file a state return. RI resident can simply check a box on their Rhode Island return to indicate that they had insurance which is done by answering a few simple questions in your eFile account
Since 2020, VT has had a minimum essential coverage requirement for residents, but there is no penalty for those who do not comply. While it is required to be indicated on the return, there is no penalty for not having it; the state simply uses the data collected to reach out to those without it and attempt to provide affordable coverage options. When you file your 2022 Taxes, enter whether or not you had health insurance in your eFile account
so you can comply with the state's regulations - there is no penalty for answering no
Enacted in 2018, D.C. residents are required to report their health insurance each year to be assessed a penalty if they do not have health insurance. The state penalty is equal to $695 per uninsured adult and $250 per child or 2.5% of the household income, whichever is greater. D.C. residents will want to indicate their health insurance situation when they file their return - this can be done on eFile.com
by answering a few simple questions. You can avoid the penalty by providing your health insurance information or by meeting certain exemptions (for example, you are not required to file a state tax return).
Prepare and e-file your federal and multiple state returns on eFile.com - do it all for less as eFile offers unlimited state returns for one low price, not per return. eFile will help you add your health insurance information to your IRS and state income returns as applicable. See more details on state taxes.
Since the individual mandate is no longer required and exemptions are not relevant for your 2022 Return, the information below does not apply and is archived for 2018 and prior year returns.
Tax Payment for Not Having Health Insurance
Almost all U.S. citizens and legal residents (including dependents) were required to have health insurance for the entire years of 2014 - 2018 because of the Affordable Care Act. If you didn't have health insurance during the year, you may have had to pay a fee for not having insurance, however, you may have qualified for a tax payment exemption.
If you were not covered by health insurance during 2018, 2017, or other previous year, you may owe a tax fee that is known as the individual shared responsibility payment payable when you file your 2018 or earlier tax return.
For 2018, the payment is either the flat fee or the percentage of household income, whichever method is higher:
1. The flat fee for 2018 is $695 per adult and $347.50 per child under 18 years old, but not over the maximum of $2,085 per family.
2. The percentage of household income for 2018 is 2.5% of your taxable income over the minimum filing amount for your filing status, but not over the average cost for the bronze level health plan available through the Marketplace in 2018.
Below are the 2018 average costs for bronze level coverage:
- $575 per month for an individual (or $6,900 annual)
- $1,635 per month for a family with 5 or more members (or $19,616 annual).
The following is the penalty for an unmarried person with no dependents and no health insurance who made $40,000:
1. Using the flat fee method, this would be $695.00.
2. Using the percentage of household income method, since the 2018 minimum filing requirement for a single person is $10,400, this amount is subtracted from the total income resulting in $29,600. Thus, 2.5% of $29,600 is $740.
Result: Since $740 is larger than the flat fee of $695.00, this person would have a total payment of $740 for 2018 (or $61.66/month for every month that they did not have health insurance). This person would make their payment when they file their 2018 Tax Return.
Tax Payment Exemptions
You might qualify for an exemption to the tax payment if any of the following is true for you:
- Uninsured for less than 3 months of the year
- Lowest priced coverage for you would cost more than 8% of your income
- You don't need to file a tax return because your income is too low
- Part of a recognized religious group with objections to health insurance
- Member of a recognized health care sharing ministry
- Native American eligible for services through an Indian Health Services provider
- Incarcerated (either detained or jailed)
- Neither a U.S. citizen, a U.S. national, nor an alien lawfully present in the U.S.
If you are not able to purchase health insurance due to a hardship, you might qualify for the hardship exemption. To qualify for an exemption, you must be facing any of the various circumstances defined by the Health Insurance Marketplace, such as:
- Filed for bankruptcy in the last six months
- Received a shut-off notice from a utility company
- You had medical expenses that you could not pay in the last 24 months, which resulted in substantial debt
- Recently experienced domestic violence
- Individual insurance plan was canceled and you believe other Marketplace plans are unaffordable
- Experienced another hardship in obtaining health insurance
- Experienced a fire, flood, or other natural or human-caused disaster that caused substantial damage to your property
For more information about the hardship exemption, see healthcare.gov/exemptions
There are two ways you can apply for an exemption:
You are not responsible for the tax payment for not having insurance for that month. However, you must claim the exemption on your tax return or report the exemption you obtained from the Marketplace (also known as the Exchange) by completing Form 8965, Health Coverage Exemptions and including it with your filed tax return.
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