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California Residents New Tax Law 2020: Health Coverage

By January 15, 2020 No Comments

You may have heard that the Federal penalty for not having health insurance when filing 2019 taxes is no more. However, for California residents, starting January 1, 2020, there will be an Individual Shared Responsibility Penalty in California when you don’t have qualifying health insurance ALL year in 2020.

The penalty for no health coverage is based on the number of people in your household and your California state income. The penalty will be the higher of either a flat amount, based on the number of people in the tax household, or a percentage of the gross household income. The flat amount is $695 per adult and $347.50 per child. A typical family of 3 (2 adults, 1 child) that goes uninsured for the whole year would face a penalty of at least $1,737.50.

Keep in mind, the penalty could be higher if the gross household income in 2020 exceeds the state filing threshold. For example, the state filing threshold for a married couple, both under 65 years old with one dependent for the 2019 tax year is $49,085. Therefore, a family of 3 (2 parents, 1 child) with a gross household income of $150,000 will pay a higher penalty of 2.5% of the gross income that exceeds the filing threshold: ($150,000 – $49,085 x .2.5%) = $2,522.88.

The penalty will be applied by the California Franchise Tax Board when you file your 2020 state income tax return in 2021. For information about exemptions, the penalty, including the amount your family could owe for not having coverage in 2020, visit the Franchise Tax Board’s website, search “Health care mandate.” You can use their “Penalty Estimator” to calculate what it may cost you to not have health care coverage.

Open enrollment for Covered California is now through January 31, 2020. If you live in California and don’t have health insurance, we strongly suggest contacting a Covered California agent immediately and discuss health insurance options for the year 2020.