Do You Get Penalized for Not Having Health Insurance?

Picture a worker who recently moved for a remote role. Their paycheck looks the same, but their old health plan ended with their previous job, and they figure they can wait until the next enrollment period to sort it out. Months later, tax time arrives, and a form asks about health coverage. Suddenly they're wondering whether skipping insurance is about to cost them money at tax time.

That confusion is common because the answer depends on where you live. There is no federal tax penalty for going without health insurance, but some states may have their own requirements and penalties. California is one clear example.

Is there a federal penalty for not having health insurance?

No. The federal fee for not having health insurance ended in 2018. HealthCare.gov explains that people without coverage no longer pay a federal tax penalty and do not need an exemption simply to avoid one. HealthCare.gov

That's why you may hear that insurance is "not required." At the federal level, that's true in terms of a tax penalty. It does not mean every state follows the same approach. A state can create its own coverage requirement and enforce it through its own tax system, which means your state of tax residency matters more than where your employer is based.

California's penalty, and how it can grow beyond the minimum

California residents can face a state tax penalty if they lack qualifying health coverage and don't qualify for an exemption. For the 2025 tax year, filed in 2026, Covered California says the penalty for going uninsured the entire year is at least:

• $950 per adult
• $450 per dependent child under age 18
• $2,800 at minimum for a family of four

The word "at least" is doing real work here. These figures are floors, not caps. California's penalty is generally calculated two ways, and the household owes whichever amount is higher: the flat per-person amount above, or a percentage of household income above the state's tax filing threshold. A higher-income household that goes uninsured all year can owe well beyond the flat minimums once the income-based calculation applies. The California Franchise Tax Board applies and collects the penalty when a return is filed. See Covered California's penalty and exemption guidance for current details.

Because the calculation depends on income and household size, someone should not assume the flat per-person figure will be their final bill. It's a starting point, not a ceiling.

Why the answer can change by state

Health insurance rules get confusing because several issues get blended together:

1. Federal rules: there is no federal uninsured penalty.
2. State rules: a state may have its own requirement, reporting process, or financial penalty.
3. Tax residency: the state where you owe taxes may matter more than the location of your employer.
4. Coverage status: not every arrangement counts as qualifying coverage.
5. Exemptions: you may qualify for relief based on circumstances the state recognizes.

"My employer is based in another state" doesn't answer the question. Neither does "my coworkers don't have insurance." Your residence, filing obligations, household situation, and coverage during the year all factor in.

What if you were uninsured for only part of the year?

A coverage gap doesn't automatically mean owing the same amount as someone uninsured all 12 months. Timing, length of the gap, and any applicable exemption can all affect the outcome. Someone might lose employer coverage after a job change, move states, or see a change in household income, all of which can affect both access to coverage and how a gap is treated on a state return.

Rather than waiting until filing season, review the rules as soon as you know you might be uninsured. California's guidance includes exemptions for certain situations, and eligibility depends on personal and financial details, so check the state's current rules rather than relying on an old return or advice meant for a different state.

Remote work makes location especially important

Remote and distributed work can complicate this picture. An employee might be hired by an organization in one state, work temporarily from another, and later establish residency somewhere else. In that scenario, the worker's location and tax status matter as much as the employer's headquarters. Employers with distributed teams should avoid assuming that one nationwide message about the lack of a federal penalty applies equally to every employee, since a worker who relocates to a state with its own mandate may face a different situation entirely.

What to do if you're currently uninsured

1. Confirm your state of residence for tax purposes; that's your starting point.
2. Check official state guidance on coverage requirements, reporting, penalties, and exemptions.
3. Review your coverage options, including an employer plan, a marketplace plan, a public program, or a special enrollment opportunity.
4. Don't assume a short gap is irrelevant. Review the dates and any available exemption.
5. Keep documentation: coverage end dates, employer or carrier notices, and anything supporting an exemption claim.
6. Ask for help early if you moved states or have a complicated household situation; a tax or benefits professional can sort out details a general overview can't.

The bottom line

You generally won't be penalized by the federal government for going uninsured, but state rules can produce a very different answer, and California's penalty can climb well past its published minimums for higher earners. Check the current rules where you live, review your coverage options, and keep good records so tax season doesn't bring an unwelcome surprise.

Informational note: This article is provided for general informational purposes only and is not legal advice. It does not represent the advice or opinion of the website or organization on which it appears.