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IRS Health Insurance Penalties in 2020

This year, the IRS will let you slide on a penalty if you did not have health insurance in 2019.

Your state, on the other hand, may not forgive.

The 2019 tax year marks the first time filers won’t be obligated to carry qualifying healthcare coverage under the Affordable Care Act.

As recently as the 2018 tax year, persons who went without coverage were assessed at a fee when they filed their federal tax return. Moreover, they paid $695 per uninsured adult or $347.50 for every kid, or they were assessed 2.5% of their yearly household income.

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The Tax Cuts and Jobs Act did away with this penalty, yet a handful of jurisdictions — Massachusetts, New Jersey, and Washington, D.C. — have put coverage mandates in place, and penalties on your 2019 tax return if you did not meet the terms.

Other states are initiating coverage mandates for 2020, stipulating residents will require to be insured this year or else pay the penalty in 2021. Those states consist of California and Rhode Island, according to the Kaiser Family Foundation.

Vermont also necessitates that its residents start carrying insurance in 2020, but has not detailed the penalties for going without.

These states will grant exceptions in a handful of circumstances, as well as families whose income falls below the state tax filing threshold.

“The states are reacting; they might want to make sure that they protect their marketplace and healthcare systems,” said Andy Phillips, director of the Tax Institute at H&R Block. “They want to make sure people have insurance coverage.”

The Penalty for Not Having Health Insurance In 2020

Even workplace coverage — wherein employers subsidize part of the premium — is becoming costly.

While your workplace health insurance will likely spare you from a state-level penalty, that’s not the case for short-term or “skinny” plans available for people.

These states require people to have qualifying health coverage — that is, they must cover a range of services, comprising prescription drugs, doctors’ services, and more.

Comprehensive employer-sponsored plans, coverage bought on health exchanges, Medicaid, and Medicare incline to fit the bill.

“Short-term policies aren’t an issue in these states, in terms of being qualified coverage,” said Jennifer Tolbert, director of state health reform at Kaiser Family Foundation.

Indeed, consumers can’t purchase short-term plans in California, New Jersey, Rhode Island, and Massachusetts. In the meantime, Washington, D.C., and Vermont limit short-term plans to only three months.

State Penalties for Not Meeting Healthcare Requirements 2020

According to Kaiser, here’s a breakdown of what you can expect if you go without health insurance in the following states.

California: The Golden State has two ways to gauge penalties. It can charge a low amount of $695 per adult or $347.50 for every kid who goes without insurance, depending on your 2020 income tax return. Alternatively, California can charge you 2.5% of gross income above the state’s filing threshold, either is higher.

Washington, D.C.: In the nation’s capital, individuals who were uninsured in 2019 are on the hook for a penalty of $695 per adult or $347.50 per child. Washington can also assess a fine of 2.5% of household income, whichever is higher. There are exemptions for households experiencing financial hardship.

Massachusetts: Penalties vary based on domestic income, and can range from $264 per year to $1,524 per year. Persons with income at or below $18,210 ($37,650 for a family of four) aren’t penalized.

New Jersey: What you pay in the Garden State depends on household size and income. For the 2019 tax year, individual taxpayers devoid of coverage could be on the hook for at least $695 — up to a maximum of $3,012. A household with two adults and three dependents, with income up to $200,000, could pay between $2,085 and $4,500.

Rhode Island: Failure to acquire coverage could lead to one of two penalties: a flat tax of $695 per adult and $347.50 per child, or 2.5% of income above the state filing threshold, whichever is higher.

Vermont: The state necessitates that all Vermonters have health insurance beginning in 2020, but has not yet determined penalty details.

Lastly, Maryland will add a box on its tax return, which filers can check and determine whether they qualify for Medicaid or subsidized coverage through the insurance exchange. The Old Line State will not levy a penalty on those without health insurance coverage.

Resources and References:

• Individual Mandate Penalties
• Tax Penalties for the Uninsured