In 2017, a federal bill passed that repealed the Affordable Care Act’s individual mandate, a tax penalty for individuals who are not enrolled in a health insurance plan. The repeal of the Federal Individual Mandate penalty fee took effect in 2019 but if you live in California a new mandate may be coming your way. Last year in 2019 the California legislature passed a budget bill that included a state-level individual mandate for those without health insurance.
According to the California Franchise Tax Board, the California mandate took effect on January 1, 2020, and requires all Californians to be enrolled in a qualifying health insurance plan or possibly face a tax penalty.
The penalty amount depends on your state income and the number of people in your household. Depending on your situation, when you file your 2020 state income tax return in 2021 your penalty could range from $695 to thousands of dollars.
How to Avoid Paying the Mandate
The mandate only applies to you if you pay taxes in California.
If you already have health insurance, whether through your employer, the individual marketplace, or a government-sponsored or subsidized plan then you don’t have to worry. The penalty only applies to people who don’t have health insurance.
If you don’t have health insurance, you could still qualify for an exemption from the penalty. The exemption reasons vary from excessive cost of obtaining insurance (exceeding 8.24% of household income in the 2020 taxable year) to have a short coverage gap of 3 consecutive months or less to many more exemption qualifications.
If you and your dependents don’t qualify for an exemption then you, your spouse or domestic partner, and your dependents all need to enroll in a health insurance plan for every month beginning on January 1, 2020. Otherwise, you may have to pay a fee under your 2020 tax returns when you file in spring 2021.
We encourage you to call us today to make sure that you and your employees are covered in a plan. For more information on the California individual mandate and how to get the best coverage for your business group, call us today at 650-348-6234.
How AEIS Can Help You and Your Business
Advanced Estate and Insurance Services, Inc. (AEIS) is a family-owned business with over 30 years of experience in the San Francisco Bay Area. As your broker, our goal is to maximize the ROI from your benefits and to free up your time and bandwidth. Our role is to advise and advocate on behalf of your company and your employees on all benefits-related items. We are not just a broker, but your trusted partner. We serve as an extension of your team to help grow your business.
Disclaimer: Any compliance-related information in this blog is intended to be informational and does not constitute legal advice regarding any specific situation. Should you require further compliance assistance or legal advice, please consult a licensed attorney.