BREAKING: New Penalties for CA Residents Without Qualifying Healthcare Plan

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Now that the ObamaCare penalties have been waived by President Trump, California just passed a healthcare mandate with it's own new penalties for failure to carry acceptable health insurance.

Beginning in 2020, California will impose an individual healthcare mandate. Residents must obtain healthcare coverage, unless they qualify for an exemption. Those who fail to obtain coverage may owe a penalty on their California income tax returns.

Individual Shared Responsibility Penalty

California will impose the penalty for each month that an individual fails to enroll in and maintain minimum essential coverage for:

  • The individual

  • The individual’s spouse

  • The individual’s dependents

The penalty for a tax year equals the lesser of:

  • The total monthly penalty amounts for the year

  • 1/12 of the state average premium for California Health Benefit Exchange bronze plans, multiplied by the number of months in which the failure occurred

The monthly penalty equals 1/12 of the greater of:

  • $695 per adult plus $347.50 per child that failed to maintain required coverage during the month, up to a maximum of $2,085

  • 2.5% of the excess of the individual’s household income for the year over the amount of gross income that would trigger a state income tax return filing requirement

Note: the specified dollar amounts are subject to cost of living adjustments.

For tax years during which a similar federal penalty applies, California will reduce the state penalty. It will reduce the penalty, but not below zero, by the amount of the federal penalty imposed for each month during which a state penalty applies.

Exemptions From Imposition of Penalty

California will not impose a penalty on an individual for a month in which any of the following apply:

  • The individual’s required contribution, determined on an annual basis, for coverage for the month exceeds 8.3% of the individual’s household income for the tax year

  • The individual does not have enough income to trigger a return filing requirement for the tax year

California also will not impose a penalty with respect to any household member for a month if:

  • The last day of the month occurred during a period in which the household member did not maintain minimum essential coverage

  • The period was a continuous period of three months or less

If you have any questions about California’s new healthcare mandate and how it may impact your specific tax situation, please CONTACT US right away. We’re here to help!