Before January 2019, you paid a penalty if you did not have the required health insurance. this is called an individual mandate, also known as an “obamacare” individual mandate.
although technically you still need to have health insurance in the us. In the US, there are no federal penalties for not having coverage. but there are individual state-level mandates in five states and washington, d.c.
what is the individual mandate?
The idea of the individual mandate is that both healthy and sick people contribute to the cost of health insurance. When more people pay, it helps balance costs and makes insurance more affordable overall.
The Affordable Care Act is intended to provide the cheapest possible health insurance, even for people with pre-existing conditions. Before this legislation, insurers could refuse coverage or charge more to people with health needs that could increase a company’s costs, leaving many people uninsured.
Are there tax penalties for the individual mandate?
From 2014 through the end of 2018, people without health insurance were assessed a federal tax penalty when they filed their tax returns. fines started at $95 for one person and increased each year until 2016, when the cost was $695 or 2.5% of a person’s annual income, whichever was greater. from 2016 to 2018, the fine was a flat dollar amount based on US dollars. inflation rates.
The maximum penalty for an individual was based on the national average annual cost of a bronze plan sold through the health insurance marketplace. in 2014, that amount was $204 per month for an individual, or $2,448 per year.
does the individual mandate still exist?
The individual mandate still exists, to the extent that you are still required to maintain health insurance. but in January 2019 the tax penalty piece of the individual mandate was removed at the federal level.
While you no longer pay a federal penalty for lack of insurance, you could face state-level penalties if you live in California, Massachusetts, New Jersey, Rhode Island, or Washington, D.C. Vermont residents are not charged a fee, but must report coverage on their state tax returns.
tax penalties by state
Some states’ tax penalties are similar to the original federal mandate, while other states have very different rules. you may want to familiarize yourself with your state’s requirements to avoid unexpected costs at tax time.
This is especially true if you have a low or moderate income, which may qualify you for subsidies to help cover your insurance costs. But even if you pay full price for insurance, you’re protected from having to pay the full bill for a major health problem.
In California, tax penalties for not having health insurance typically increase each year based on inflation. for 2022, residents without year-round coverage pay a minimum penalty of $800 per adult and $400 per dependent child under the age of 18. a family of four that goes all year without coverage will owe a minimum of $2,400 at tax time.
You can find out what you may owe using the California Tax Penalty Calculator.
The tax penalties for being uninsured in massachusetts are based on income and family size and only apply to adults over the age of 18. If you are single and your income is at or below 150% of the federal poverty level, you will not have to pay a penalty. people who earn between 150% and 300% of the federal poverty level pay no more than half the cost of the cheapest connectorcare plan sold in the state insurance exchange. penalties increase for families and individuals with higher incomes.
new jersey’s individual mandate is called a shared responsibility payment. if you don’t have coverage or don’t qualify for an exemption, you’ll pay a rate based on family income, family size, and the average annual cost of a bronze plan in the state.
new jersey provides a calculation page to help you estimate your shared responsibility payment.
If you don’t have health insurance in Rhode Island, you’ll pay 2.5% of annual household income or a per person rate of $695 plus $347.50 for each child under 18, whichever is greater.
Under the percentage method, your maximum penalty will not exceed the average annual cost of a bronze plan sold on the state insurance exchange. if you have to pay the penalty per person, you only need to count the people in your household who don’t have insurance.
The individual mandate for residents of Washington, D.C., is similar to that of Rhode Island. You must have qualified health insurance, obtain an exemption, or pay a penalty when you apply for D.C. tax return. you pay a flat rate of $695 per adult and $347.50 for each child under the age of 18 or 2.5% of your family’s income, whichever is greater.
Maximum tax penalties are based on the average annual cost of a bronze plan sold through the dc health link insurance exchange. in 2022, the maximum penalty is $3,450 per year per person. in a household where multiple people are without coverage, that amount is multiplied by the number of people without coverage up to a maximum of five household members. this means that the fine for a family of five or more would not exceed $17,250.
what is minimum essential coverage?
minimum essential coverage is at least the lowest amount of coverage required to meet the individual mandate. Minimum essential coverage plans provide the 10 essential health benefits required by the Affordable Care Act and adhere to federal rules for maximum deductibles and copay amounts.
You have minimum essential coverage if you are enrolled in any of the following plans: