What Happens If You Don’t Have Health Insurance for Taxes?

Understanding how your health coverage status impacts your tax filing is important, especially given evolving regulations. This guide clarifies the current landscape of health insurance and tax obligations.

Health Coverage Requirements

The Affordable Care Act (ACA) previously included a federal individual mandate, requiring most Americans to maintain minimum essential health coverage or pay a penalty. However, for tax years beginning after 2018, the federal penalty for not having health insurance was reduced to zero.

While the federal penalty has been eliminated, some states have implemented their own health insurance mandates and associated penalties. States that currently enforce such individual mandates include California, Massachusetts, New Jersey, Rhode Island, and the District of Columbia. Vermont also encourages residents to maintain coverage, though it does not impose a noncompliance penalty.

Assessing Your Coverage Status

Determining if you had qualifying health coverage for the entire tax year is an important step in understanding your tax obligations related to health insurance. “Minimum essential coverage” (MEC) is the standard defined by the ACA for what constitutes adequate health insurance. This typically includes most employer-sponsored plans, plans purchased through the Health Insurance Marketplace, Medicare Part A, and most Medicaid programs. Certain limited-benefit plans, such as stand-alone vision or dental coverage, workers’ compensation, or accident-only policies, do not qualify as MEC.

To verify your coverage periods, you should receive tax forms from your health insurance provider or employer. Form 1095-B, Health Coverage, is issued by insurance companies and government agencies (like Medicare or CHIP) to report that you had MEC. If you received health insurance through a large employer (generally 50 or more full-time employees), you might receive Form 1095-C, Employer-Provided Health Insurance Offer and Coverage. These forms detail the months you and your family members were covered, allowing you to confirm if you had coverage for all 12 months or only a portion of the year. While you do not typically need to attach these forms to your federal tax return, keeping them with your tax records is advisable for verification.

State Penalties for Lack of Coverage

For residents of states with individual health insurance mandates, not maintaining minimum essential coverage can result in a financial penalty when filing state income taxes. The calculation of these penalties varies by state, often based on a percentage of household income, a flat fee per uninsured individual, or a combination of both, frequently capped at a certain amount.

California

In California, for the 2025 tax year, the penalty for lacking MEC is the higher of a fixed amount based on household size or 2.5% of household income above the state’s tax filing threshold. The fixed amount is $900 per uninsured adult and $450 per uninsured child.

New Jersey

New Jersey’s penalty for the 2025 tax year is similarly calculated as the greater of 2.5% of household income above the tax filing threshold or a flat fee. For an individual, the minimum flat fee is $695, and the penalty is capped at the statewide average annual premium for a Bronze Health Plan, which could be around $4,284 for an individual.

Massachusetts

Massachusetts imposes penalties on adults deemed able to afford health insurance but who did not enroll in coverage. For the 2025 tax year, penalties range from $300 to $2,244, depending on income and household size, and are imposed through the personal income tax return. The penalty cannot exceed 50% of the minimum monthly insurance premium an individual would have qualified for through the state’s Health Connector.

Rhode Island

Rhode Island’s mandate, effective since 2020, also assesses a penalty on state income tax returns for those without MEC. The penalty is the higher of 2.5% of yearly household income above the tax filing threshold or a flat fee of $695 per person ($347.50 per child under 18). The income-based penalty is capped at the total annual premium for an average bronze plan sold through HealthSource RI.

District of Columbia

The District of Columbia’s individual mandate began in 2019, mirroring the federal ACA mandate’s calculation method. The penalty is the greater of a flat dollar amount ($695) or 2.5% of income. For a household with multiple uninsured members, the penalty can be multiplied up to a cap for five household members, based on the average bronze plan premium.

Qualifying for Exemptions

Even if you did not maintain continuous health coverage, you may qualify for an exemption from state health insurance mandates, which can relieve you of the associated penalty. These exemptions typically address specific circumstances that make obtaining coverage difficult or unnecessary. Common exemptions often include short coverage gaps, usually defined as being uninsured for less than three consecutive months. If you were covered for at least one day in a month, that month generally counts as covered.

Financial hardship is another basis for an exemption. This can apply if the lowest-priced health plan available to you, through a state marketplace or employer, would cost more than a certain percentage of your household income. Other financial hardships, such as homelessness, eviction, or bankruptcy, may also qualify. Individuals with income below the state’s tax filing threshold are typically exempt from the mandate.

Further exemptions can include religious conscience exemptions for members of certain recognized religious sects opposed to health insurance. Individuals who are incarcerated, those living abroad for extended periods, or members of federally recognized Native American tribes may also be exempt. The specific criteria and application process for these exemptions can vary by state, often requiring an application to the state’s health insurance marketplace or tax authority.

Tax Reporting Steps

When filing your state tax return, it is necessary to report your health coverage status or claim any applicable exemptions if you reside in a state with an individual mandate.

It is important to note that federal tax forms, such as Form 1040, no longer include specific lines for reporting health coverage status or the federal individual shared responsibility payment, as that penalty was reduced to zero.

For state-level mandates, however, state tax forms will contain specific sections or schedules dedicated to health coverage reporting. For instance, Rhode Island requires Form IND-HEALTH and a Shared Responsibility Worksheet to be attached to the RI-1040 or RI-1040NR if applicable. New Jersey residents report their health insurance status on their NJ-1040, often using a specific schedule like Schedule NJ-HCC to claim an exemption. Massachusetts requires individuals to report health insurance information on Schedule HC, regardless of the insurance type, to avoid penalties.

If you had qualifying coverage for the entire year, you will typically check a box indicating full-year coverage. If you had coverage for only part of the year or no coverage, you would then navigate the state’s specific instructions for calculating any penalty or applying for an exemption. Should you receive a notice from a state tax agency regarding a lack of coverage, it is crucial to respond promptly, providing documentation of your coverage or exemption eligibility. State tax agency websites and their tax form instructions provide detailed guidance on these reporting requirements.