You might assume the health insurance penalty disappeared years ago, and for most of the country, you would be right about that. Congress zeroed out the federal individual mandate penalty back in 2019, and millions of Americans stopped worrying about the fine entirely. 

The IRS no longer asks about your coverage status on your federal return, which reinforced the belief that penalties were officially over. But if you live in certain states, the penalty is very much in effect, it is being enforced, and it could hit your tax refund. 

Some residents are discovering this only after filing their state taxes and seeing hundreds or thousands of dollars suddenly vanish from their refund. You deserve to know exactly which states still charge this fine, how much you could owe, and what your options actually look like.

The federal penalty ended, but five states rewrote the rules on their own

The Affordable Care Act originally required every American to carry health insurance or pay a tax penalty when filing their federal return. From 2014 through 2018, the IRS collected that penalty as part of your income tax obligations, and the fines reached as high as $2,085 per household.

The Tax Cuts and Jobs Act of 2017 reduced the federal penalty to zero dollars starting in 2019, effectively eliminating enforcement nationwide. That legislative change convinced most people the mandate was dead, but several states moved quickly to create their own replacement penalties.

Related: KFF says ACA enrollees are cutting food to keep insurance

Five states and Washington, D.C., now enforce their own individual mandates with real financial penalties collected through your state tax return. The states are:

• California
• Massachusetts
• New Jersey
• Rhode Island
• Vermont (does not currently impose a dollar-amount fine) 

Washington, D.C., rounds out the list as the sixth jurisdiction enforcing a financial penalty against residents who lack qualifying health coverage. These state-level penalties are assessed through your state tax filing, and your state can offset your refund to collect them, according to KFF.

California’s penalty can reach well beyond $900 for a single adult

California launched its own individual mandate in 2020 after the federal penalty disappeared, requiring all residents to maintain minimum essential coverage. If you skip coverage for the full year, the California Franchise Tax Board calculates your penalty using two different methods and charges you whichever amount turns out to be higher.

The flat-rate method sets the minimum fine at roughly $900 per uninsured adult and $450 per dependent child under 18 in your household. The percentage method takes 2.5% of your household income above California’s state filing threshold and compares that figure against the flat rate.

What a penalty looks like for a single California resident

Consider a single adult in California earning $50,000 per year who went without qualifying health coverage for the entire 2025 tax year. The flat-rate penalty would be $900, but the percentage method calculates 2.5% of roughly $37,000, after subtracting the filing threshold amount. 

That percentage calculation produces approximately $925, so the state would automatically charge the higher amount when you file your state return.

For families, the penalties stack quickly because each uninsured dependent adds to the total, and the income-based calculation increases with earnings. California uses this penalty revenue to fund state-level insurance subsidies that help reduce marketplace premiums for middle-income households across the state.

Massachusetts has enforced its health insurance mandate longer than any other state

Massachusetts created its individual mandate back in 2006, more than eight years before the federal government launched the Affordable Care Act’s own version. The state requires residents to carry coverage that meets its Minimum Creditable Coverage standard, which is stricter than what most other states demand. 

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Penalties are assessed monthly for each month you lack coverage, after allowing a grace period of up to 63 consecutive days, according to the Massachusetts Health Connector.

The penalty amount is capped at 50% of the lowest-priced plan you could have enrolled in through the state’s ConnectorCare marketplace program.

How Massachusetts calculates its monthly penalties by income

Your penalty depends on your income bracket, and the Massachusetts Department of Revenue publishes an updated schedule each year listing the exact monthly amounts. Residents with incomes at or below 150% of the federal poverty level are not subject to any penalty because they qualify for free ConnectorCare coverage.

For higher earners, monthly penalties can reach $135 or more per uninsured adult, which translates to roughly $1,620 over a full calendar year. You report your coverage status on Schedule HC when filing your Massachusetts state tax return, and penalties are collected through that same filing process.

New Jersey and Rhode Island use penalties that mirror the old federal formula

New Jersey introduced its own mandate in 2019 through the Health Insurance Market Preservation Act, which closely mirrors the original federal penalty structure. Residents who lack minimum essential coverage face a penalty based on household size and income, capped at the average annual cost of a bronze-level plan.

The State of New Jersey uses penalty revenue to fund its reinsurance program, which helps keep marketplace premiums more stable across the state for all enrolled residents. You must attach Schedule NJ-HCC to your state tax return to report your health coverage status and report your health coverage status and any exemptions that may apply.

Rhode Island follows a similar structure with slightly different dollar amounts

Rhode Island launched its individual mandate in January 2020, requiring residents to maintain qualifying coverage or face a penalty on their state return. The penalty is the greater of $695 per uninsured adult and $347.50 per child, or 2.5% of your household income above the state’s filing threshold.

Like New Jersey, Rhode Island caps the total penalty at the average cost of a bronze-level marketplace plan available in the state for that year. You report your coverage details on Form IND-HEALTH when filing your Rhode Island taxes, and any penalty owed reduces your refund or increases your balance.

New Jersey and Rhode Island replicate the former federal model, ensuring penalties remain familiar yet impactful for uninsured households.

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Washington, D.C., collects penalty revenue to stabilize its local insurance market

Washington, D.C., enacted its individual mandate in 2019, making it one of the first jurisdictions to replace the disappearing federal penalty with a local version. The penalty structure closely follows the original ACA formula, charging roughly $745 per uninsured adult and $372.50 per child in the household each year.

The district also applies a 2.5% income-based calculation against household income above the federal filing threshold, using whichever amount is higher. Revenue from the penalty goes directly into D.C.’s Individual Insurance Market Affordability and Stability Fund to support outreach and reduce marketplace premiums.

You file your penalty through Schedule HSR on your D.C. tax return, and the district can offset your refund if you owe a balance for that year.

Exemptions you can claim to avoid the penalty on your state tax return

Every state that enforces a health insurance penalty also offers exemptions for residents who qualify based on income, hardship, or specific life circumstances. You are not automatically exempt from the penalty simply because you believe coverage is too expensive or you prefer not to carry health insurance.

The most common exemptions across all five states and Washington, D.C., include the following categories that you should review before filing your taxes.

• Income below the filing threshold: If your income falls below your state’s minimum filing requirement, you generally owe no penalty for that tax year.
• Unaffordable coverage: If the cheapest available plan costs more than 8.5% of your household income, most states will exempt you from the penalty.
• Short coverage gaps: Most states allow gaps of up to 63 consecutive days without triggering a penalty, giving you time to transition between plans.
• Financial hardship: Events like eviction, bankruptcy, domestic violence, or utility shutoff notices can qualify you for a hardship-based exemption from the penalty.
• Medicaid eligibility: If your income is below 138% of the federal poverty level, you likely qualify for Medicaid, which satisfies the mandate at little cost.

You must actively claim your exemption on your state tax return because the penalty will be assessed automatically if you do not report an exemption. Each state has its own exemption form and process, so check your state’s tax authority website well before the filing deadline to avoid surprises.

Rising premiums in 2026 make the coverage decision more difficult for millions of Americans

The expiration of enhanced ACA premium tax credits at the end of 2025 has pushed health insurance costs significantly higher for millions of marketplace enrollees. ACA marketplace premiums rose an average of 26% for 2026, with some states seeing increases of 30% or more on benchmark silver plans, according to TheStreet’s reporting.

For residents in penalty states, this creates a painful bind where coverage is more expensive but going without coverage triggers a state-level tax fine. A family of four earning $60,000 per year might still find subsidized marketplace coverage for $50 to $150 per month after remaining federal tax credits.

The real cost of skipping coverage goes far beyond the penalty itself

The financial risk of being uninsured extends well beyond any state penalty because a single medical emergency can create tens of thousands in debt. An emergency room visit for a broken bone typically costs between $2,500 and $4,000, and a short hospital stay can easily exceed $10,000 without any coverage.

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Health insurance also provides negotiated rates with providers, access to preventive care, and an annual out-of-pocket maximum that caps your total spending.

Without coverage, you pay full retail prices for every medical service, and providers can send unpaid balances to collections, which damages your credit score.

Steps you can take to protect yourself from unexpected penalty charges

If you live in California, Massachusetts, New Jersey, Rhode Island, or Washington, D.C., you should take specific steps before your next tax filing deadline. Waiting until you file your return to learn about the penalty means you have already missed your opportunity to enroll in coverage or claim an exemption.

• Check whether you qualify for a Special Enrollment Period. Life events such as a job loss, marriage, or move can open a window to enroll in coverage outside the standard open enrollment dates.
• Review your state’s exemption requirements now. Each state publishes specific guidelines on its tax authority website, and some exemptions require advance applications before you file your return.
• Compare marketplace plans with your current income. Even without enhanced subsidies, you may still qualify for significant premium tax credits that make a bronze or silver plan more affordable.
• Check your Medicaid eligibility. If your income has dropped or your household size has changed, you might now qualify for Medicaid, which is available for enrollment year-round.
• Verify that your current plan meets your state’s coverage standards. Short-term plans, health-sharing ministries, and fixed-indemnity plans typically do not satisfy state mandates and will not protect you from the penalty.

Your best defense against an unexpected penalty charge is knowing the rules in your state before tax season arrives, not after the bill shows up. The difference between paying a fine and keeping your refund often comes down to whether you reviewed your options early enough to take advantage of them.

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