What If I Don’t Have Health Insurance?

 

Editor’s Note: You may wonder “What if I don’t have health insurance?” This post was updated from a popular post with up-to-date info about the impact of having health insurance (or not) on your taxes.

“Do I need health insurance to file taxes?”

healthcareBefore 2019, you needed health insurance (or a qualifying exemption) or you were subject to a penalty payable with your income tax return. It was referred to as the “individual responsibility payment.” This was a central requirement of the Affordable Care Act (ACA).

The Tax Cut and Jobs Act (TCJA) repealed the penalty (made the penalty amount $0) starting with tax year 2019. But you may wonder, “Do I need health insurance to file taxes after the ACA penalty was repealed?” The answer is no. You no longer will be penalized for not having health insurance.

Before the TCJA change, you were subject to a penalty if you had a lapse in health insurance for a specific amount of time. You were required to answer questions about your healthcare coverage when you filed your tax return.

Starting in 2019, taxpayers are no longer required to demonstrate that they have coverage or qualify for an exception. However, taxpayers who receive advance premium tax credits through an Exchange must still reconcile the credit when they file their tax returns.

Previous Affordable Care Act requirements:

While the health tax penalty no longer applies, we’ll cover a few questions and answers related to the previous health tax penalty:

1 – “Why did the law include a health insurance penalty?”

The penalty was one way of making sure U.S. citizens and residents obtained the required coverage.

2 – “How much was the penalty?”

If you did not have coverage prior to 2019, and didn’t qualify for an exemption, you had to pay the greater of these two amounts:

  • 2.5% of your yearly household income. Only the amount of income above the tax filing threshold – ex. $12,000 for a single filer in 2018– was used to calculate the penalty.
  • $695 per adult and $347.50 per child under 18 for the year. The maximum penalty per family using this method is $2,085. If you were uninsured for part of the year, the penalty was 1/12 of the annual amount for each uninsured month.

If you were uninsured for a period of less than three months you were exempt from the penalty. Overall, the annual penalty was limited to the national average premium for a Bronze plan.

3 – “What were healthcare insurance exemptions?”

If you qualified for an exemption prior to 2019, you could have avoided a penalty. There were a variety of exemptions, many of which could be claimed on your federal tax return. Some common exemptions from the penalty included having too little income, religious objections, incarceration, or being out of the country. There were also hardship exemptions, which could be claimed if tough life situations prevented you from getting health insurance.

4 – “How did you pay the health insurance penalty?”

If you were subject to a penalty prior to 2019, you used the worksheets located in the instructions to Form 8965, Health Coverage Exemptions, to calculate the amount owed. The penalty either reduced your refund or increased your balance due on your tax return.

Still have questions about penalties, or how the ACA affects your taxes? Make an appointment with a tax preparer at H&R Block.

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