What You Need to Know About California’s Individual Mandate Penalty

You might remember that the state of California instituted its own individual mandate penalty. Beginning in 2020, California citizens who failed to enroll in a healthcare plan will face a penalty on their state income taxes each year.

Now, in 2021, the penalty has increased a bit. When you file your taxes in the spring, you will be asked for proof of healthcare coverage. Those who did not enroll in a healthcare plan this year will face a fee which amounts to the greater of the following:

• A flat fee of $800 per adult and $400 per dependent in the household, up to a maximum of $2400,

OR

• 2.5 percent of all gross household income over the tax filing threshold

Again, the penalty is the greater of either of those options.

Under the law, any of the following types of healthcare plans will satisfy the requirements of the law:

• A group healthcare plan sponsored by your employer
• A plan purchased through Covered California
• A plan purchased directly from the provider
• Medi-Cal (California’s version of Medicaid)
• Any type of Medicare plan

Remember, this Individual Mandate is separate from the federal mandate, and applies to California citizens only. If you’re not a California citizen, there’s no need to worry. Also, the law does allow for some exemptions to the mandate and penalty, but we don’t recommend that you rely upon those. Even if you did qualify for an exemption one  year, there’s no guarantee that you will continue to qualify. And of course, the personal cost of going without health insurance could potentially be significant.

If you don’t already have health insurance, give us a call right away. Open Enrollment is going on now, and we can get you covered by a plan that satisfies the requirements of the law.