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Health Insurance Basics

Understanding the Health Insurance Tax Penalty and Its Exemptions

December 07, 2017

Having a health plan has always been a good idea, but the Affordable Care Act made it a requirement. If you don’t have a health plan, you pay a penalty when you file your taxes. The penalty is either 2.5 percent of your household income or a flat fee per person, whichever is greater, according to But there are some exceptions to this rule. Here are some reasons you may be exempt from paying a fine.

Income and Hardship-Related Exemptions
  • If the lowest-price coverage available to you costs more than 8.13 percent of your household income.
  • If your income is not high enough for you to file a tax return.
  • If you had a financial hardship that prevented you from buying insurance. Hardship exemptions include homelessness, bankruptcy, or steep increases in medical expenses for an aging parent in your care. If you were facing eviction or foreclosure, were a victim of domestic violence, or experienced the death of a family member, you may also qualify. You must apply for a hardship exemption, and if you qualify, you don’t pay a penalty for the months you were uncovered.
Health Coverage-Related Exemptions
  • You were uninsured for no more than two months in a row.
  • You lived in a state that didn’t expand its Medicaid program, and meet certain income requirements.
Group Membership Exemptions
  • You’re part of a federally recognized tribe.
  • You’re an American Indian, Alaska Native, or are eligible for services from the Indian Health Service.
  • You’re part of a health care sharing ministry.
  • You’re a member of a religious group that is opposed to accepting insurance benefits.
Other Possible Exemptions
  • If you were in prison, even for a day, you can claim an exemption for the month.
  • You’re a U.S. citizen but you spent 330 days of the year living abroad, or you claimed residency in another country.
  • You’re not a U.S. citizen and meet certain requirements.

If you qualify for any of the health insurance penalty exemptions listed above, you can claim an additional exemption if someone in your household was born, adopted, or died during the tax year. View the complete list of exemptions and learn how to apply by visiting