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In partnership with
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Every Saturday, we open the mailbag, pour some strong coffee, and tackle the tax questions keeping America awake at 2 a.m. Here’s this week’s question:
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I can’t afford health insurance this year. Will I owe the IRS because of it?
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The short answer is no, you will not owe the federal IRS a penalty for not having health insurance this year. However, depending on where you live, you might owe a penalty to your state government.
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1. The Federal Rule (IRS)
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2. State Penalties (State Tax Departments)
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Five states and Washington, D.C. have their own mandates. If you live in one of these locations, you may face a penalty when you file your state income taxes.
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California: Generally $900 per adult ($450/child) OR 2.5 percent of gross income, whichever is higher.
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Massachusetts: Varies by income; up to 50 percent of the cost of the lowest-priced state plan (approximately $2,244/year max for high earners).
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New Jersey: Based on the average cost of a “Bronze” health plan; generally ranges from $695 to over $4,000 depending on income/family size.
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Rhode Island: $695 per adult ($347.50/child) OR 2.5 percent of household income, whichever is higher.
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Washington D.C: $745 per adult ($372.50/child) OR 2.5 percent of household income, whichever is higher.
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Vermont: Requires reporting insurance status, but currently charges no financial penalty.
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3. How to Claim an “Affordability” Exemption
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Since you mentioned you cannot afford coverage, you likely qualify for an exemption even if you live in a penalty state. You generally will not be penalized if:
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Affordability Exemption: The lowest-priced coverage available to you would cost more than a certain percentage (usually roughly 8.05 to 8.5 percent) of your household income.
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Hardship Exemption: You experienced life events like eviction, bankruptcy, or utility shut-off that prevented you from obtaining coverage.
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If you live in California, Massachusetts, New Jersey, Rhode Island, or Washington, D.C., look for the health coverage exemption form on your state tax return instructions. You must actively claim the exemption to avoid the fine.
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PS: If you have decided that reading about tax regulations on a weekend is a form of mild torture you no longer wish to endure, you can click here to opt out. We’ll miss you, but we won’t hold a grudge.
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