Health and Medical Tax Topics

Tax Impacts of the Affordable Care Act (ACA)

By Shara Abrams

Published on March 6, 2019

Updated on March 5, 2020

Enacted in 2010, the Patient Protection and Affordable Care Act (ACA) is health insurance reform that affected every American. In 2017, the Tax Cuts and Jobs Act (TCJA) was passed that eliminated the federal penalty for taxpayers who didn’t have health insurance.

Is there still a tax penalty for not having health insurance?

Up until 2018, all individuals were required to have health insurance under the ACA. That was known as the individual mandate. Beginning on January 1, 2020, the individual mandate has been eliminated, which means the penalty for not having health insurance is now $0.

If you bought health insurance through a state marketplace, you must still wait for Form 1095A to reconcile your Premium Tax Credit and file IRS Form 8962 with your federal return.

Some state penalties remain

While there is no longer a federal penalty, five states and the District of Columbia still have an individual mandate, and charge a penalty to taxpayers who don’t have health insurance. The mandate and penalty still apply for residents of California, Massachusetts, New Jersey, Rhode Island, Vermont, and the District of Columbia.

If you live in any other state, there’s no longer a penalty to worry about.

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