Is There Still a Penalty for No Health Insurance in 2020?

October 10, 2020 : Gil Charney

Editor’s Note: This article was originally published on January 23, 2018 and updated in 2020 for relevance. 

Is There a Health Insurance Penalty in 2020 for Your 2019 Tax Return?

No, tax reform eliminated the Affordable Care Act (ACA) individual penalty. The removal of the healthcare tax penalty starts with 2019 tax returns filed in 2020.

Here are some details about the ACA penalty and how it is affected by the Tax Cuts and Jobs Act (TCJA) below.

Under the Affordable Care Act, taxpayers who don’t have minimum essential health insurance coverage or qualify for an exemption were required to pay a penalty on their tax return.

How Was the Healthcare Penalty Calculated?

Prior to 2019, the healthcare tax penalty was the greater of $695 per individual (up to a maximum of $2,085) or 2.5% of household income, less the taxpayer’s filing threshold amount. In 2018, the healthcare penalty was calculated using a worksheet and entered on Schedule 4 of Form 1040.

Taxpayers who were eligible to claim a penalty exemption should have filed a Form 8965 with their tax return.

The IRS receives information about health coverage from health insurers and employers. These groups send Form 1095-AForm 1095-B, and Form 1095-C to taxpayers and the IRS. These 1095 forms show who was covered and also let the IRS know if coverage lasted all year or part of the year.

What’s Important to Note About the Affordable Care Act and Tax Reform?

Even though the individual penalty was eliminated starting with 2019 returns filed in 2020, taxpayers will continue to receive Forms 1095-A, 1095-B, and 1095-C with information about their coverage from 2019. Taxpayers should keep these forms with their tax returns.

Taxpayers who purchased coverage through the Marketplace will continue to use information reported on Form 1095-A to calculate the premium tax credit; taxpayers who received an advance premium tax credit are required to reconcile information from Form 1095-A on their tax returns.

Need Help Understanding How the Health Insurance Penalty Affects You?

Tax law changes each year, which is why you should seek personalized guidance from a tax pro. Schedule an appointment with your nearest H&R Block tax professional now.

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Gil Charney

Gil is the Director of Tax Law and Policy Analysis for The Tax Institute at H&R Block.

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