California Has Its Own Obamacare Tax Penalty
You may be required to pay a tax penalty if you don't have health insurance in California.
As of January 1, 2020, California will have its own tax penalty for residents who don't have health insurance. The penalty essentially replaces the federal Affordable Care Act penalty that ended in 2019. Unless you qualify for an exemption, you will face a California state tax penalty when you file your tax return.
What Is the Penalty for Not Having Health Insurance in California?
The formula for determining the precise penalty is complicated, but it closely tracks the former ACA penalty. In California, if you are uninsured for all of 2020 and you don't qualify for an exemption, you will owe the lesser of the following amounts:
- $695 for each adult ($347.50 for each child) up to a maximum of $2085 or 2.5% of your household income above California's income tax filing threshold, whichever amount is greater.
- The average annual premium cost for bronze-level coverage for the uninsured family members. This amount is calclulated using the bronze plans sold at Covered California, the state's health insurance exchange.
Rebecca is a single woman without health insurance who earns $50,000 in 2020. When she files her taxes in April 2021, her tax penalty will be based on $38,000 of her income, because $50,000 minus her $12,000 filing threshold equals $38,000. (This is assuming a $12,000 filing threshold; the threshold will probably be slightly higher by then.) Two-and-one-half percent of $38,000 is $950. Because that amount is greater than $695, and because an average-priced bronze plan would have cost much more than that, Rebecca's penalty will be $950.
If you are uninsured for fewer than 12 months of the year, you can calculate the penalty by determining 1/12 of the full penalty amount and then multiplying that by the number of months you were uninsured. (But if you are uninsured for no more than three consecutive months, you are exempt from the penalty altogether. See below for more information about exemptions.)
Returning to Rebecca's situation above, let's say she is uninsured for just seven months in 2020. She divides her full penalty amount of $950 by 12, which equals $79. Then she multiplies $79 by seven to get her total penalty amount of $553.
To learn about what qualifies as health coverage under Obamacare and whether you are exempt, see Do I Have to Get Obamacare in California?