Tax Penalty for Not Having Health Insurance

Since the federal government removed the tax penalty for not having health insurance in 2019, many Californians may think they are not subject to a tax penalty for not having health insurance. California responded to the removal of the federal penalty by establishing their own state tax penalty for not having health insurance which went into effect the 2020 tax year. Although no one likes tax penalties, the purpose of the tax penalty is to prevent healthy people from leaving the insurance risk pools and into less regulated plans which would make health insurance even more expensive for everyone else.

If you do not have minimum essential health coverage, you are subject to the tax penalty. Religious health ministry plans, short-term medical, accidental/critical illness indemnity plans, and other plans out in the market are not considered minimum essential health coverage. You must have a plan through an employer, a marketplace plan, or a plan through a major carrier such as Blue Shield of California, Anthem Blue Cross, Kaiser, LA Care, Oscar, or other carriers regulated by the Affordable Care Act that cover the 10 essential health benefits.

If you do not enroll in minimum essential coverage, you will face a California tax penalty of $800 per adult, $400 per child, or 2.5% of your household income, whichever is higher. You can use the California Franchise Tax Board Individual Shared Responsibility Penalty Estimator to estimate your tax penalty. If you have a gap of coverage for no more than 3 months of the year, you are not subject to the tax penalty.

If you recently started paying the tax penalty for not having health insurance, you may be eligible to apply for health insurance during the Special Enrollment Period. New to 2022, anyone who has started paying the tax penalty for not having health insurance for the 2021 tax year is eligible to apply within a 60-day window for health insurance. Please contact us at 310-909-6135 to go over your insurance options. At Solid Health Insurance Services, we strive to help our clients find the right health, dental, vision, life, and long-term care insurance which best fits their budget and medical needs.