How Tax Penalty Works

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What is the Tax Penalty for not having Health Insurance?

The Tax Penalty is also called the "shared responsibility payment" and "shared responsibility fee". All three are the same thing. As of 2014, Individuals who do not have health insurance may have to pay a fee on their taxes.

  • For 2014, the minimum flat dollar fee is $95 for each person listed on your tax return or 1 percent of your annual household income, whichever is larger. The fee will not be larger than the national average yearly premium for a Bronze plan, which is the lowest cost plan available.
  • In 2015, the minimum flat dollar fee will be $325 per person or 2 percent of your annual household income, whichever is larger.
  • In 2016, the minimum flat dollar fee will be $695 per person or 2.5 percent of your annual household income, whichever is larger.
  • Starting in 2017, the minimum flat dollar fee will increase each year by the rate of inflation. Which means the amount you will pay will either be the new inflation adjusted minimum flat dollar fee per person or 2.5 percent of your annual household income, whichever is larger.

If your income level qualifies you for the minimum flat dollar fee, then you will be charged half the amount of the adult minimum flat dollar fee ($325 per person for 2015) for each uninsured child under age 18.

Do I have to pay a Tax Penalty for each person in my family that is uninsured?

The tax penalty per family is capped at triple the per-person tax regardless of how many individuals are in the taxpayer’s household. For example, a married couple with one child or four children would pay the same minimum of $285 in 2014, $975 in 2015 and $2,085 in 2016. This would be the minimum tax penalty no matter how many uninsured dependents a taxpayer has.

The maximum tax penalty can never exceed the cost of the national average premiums for the lowest-cost “bronze” plans being offered through the Health Insurance exchanges (i.e. Covered California). Unfortunately, it is hard to predict what average rate of the bronze plan might turn out to be in the future. For 2014, the monthly national average premium for bronze-level qualified health was:

  • $204 per individual ($2,448 annually)
  • $1,020 for a family with five or more members ($12,240 annually)

Typically, Individual Health Insurance rates increase every January, so presumably the maximum will continue to increase year after year.

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?

You will have to pay a Tax Penalty when you file your taxes if you do not have health insurance or an exemption. There are nine ways to qualify for an exemption. Covered California does not run the exemption process. Exemption applications are now available from the federal government. For more information and links to the applications, visit https://www.healthcare.gov. If you have questions about exemptions, please call the federal Marketplace Services at (800) 318-2596.

Am I eligible for an exemption from the Tax Penalty?

You can apply to the federal Marketplace Services to see if you meet one of these nine different ways to qualify for an exemption:

  • You are uninsured for less than 3 months of the year.
  • The lowest-priced coverage available to you would cost more than 8 percent of your household income.
  • You do not have to file a tax return because your income is below the filing threshold.
  • You are a member of a federally recognized tribe or eligible for services through an Indian Health Services provider.
  • You are a member of a recognized health care sharing ministry.
  • You are a member of a recognized religious sect with religious objections to insurance, including Social Security and Medicare.
  • You are in prison and not waiting for a disposition of charges against you.
  • You are not lawfully present in the United States.
  • You are experiencing a qualifying hardship. (Visit https://www.healthcare.gov to learn more about qualifying hardships.)

How and when do I apply for an exemption?

Start by filling out an application for the type of exemption you think you should get (View the Applications for Exemptions table). Then, send the completed application to the address listed on the application. Do not send your application to Covered California. You can claim some exemptions when you file your federal tax return. If you wish, you may apply for some exemptions before you file your federal tax return. Please refer to the Applications for Exemptions table to see which exemptions you can or cannot claim on your tax return.

How will I know if my exemption request has been approved?

The federal government should respond to your application within two weeks. If you do not hear from anyone, call (800) 318-2596.

Am I eligible for an exemption from the Tax Penalty?

Please use the Healthcare.gov tool to find health coverage exemptions that may apply to you.