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California Health Insurance Tax Penalty

California requires most residents to have health insurance or pay a tax penalty. Learn about the individual mandate, exemptions, and how to avoid the penalty.

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

Tax year 2025 amounts:

  • $950 per adult
  • $475 per child (under 18)
  • Maximum: $2,850 per household

The Franchise Tax Board adjusts these amounts for each tax year.

Months Without Coverage Penalty Percentage
Up to 3 consecutive months 0% (Short gap exemption)
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 7.28% of your household income (tax year 2025 threshold).

  • Household income below California's filing threshold

  • 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 and not lawfully present in the United States that month
  • Member of federally recognized tribe
  • Enrolled in limited or restricted-scope Medi-Cal, or in Share-of-Cost Medi-Cal and without coverage because the monthly Share-of-Cost was not met
  • Gap in coverage of 3 consecutive months or fewer

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 31
  • Special Enrollment: 60 days after qualifying event
  • Medi-Cal: Apply any time

Cost Comparison

Consider this: for tax year 2025, a full year uninsured costs one adult at least $950 (about $79 a month), and that money buys no coverage. Your quote below shows what a plan would cost you after any financial help.

Bottom line: A premium pays for real coverage. The penalty pays for nothing you can use.

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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