A shared responsibility payment is a penalty you owe to the IRS if you don't have health insurance coverage for part or all of a year

The shared responsibility payment, also called the individual mandate penalty, is money you pay to the IRS when you file your tax return if you went without may have access to health insurance. It is not a payment to an insurance company or a hospital—it goes directly to the federal government as a tax penalty. The IRS calculates it based on how many months you were uninsured and your household income.

This penalty exists because the Affordable Care Act (ACA) requires most people to maintain health insurance or pay a consequence. The amount you owe depends on which year you were uninsured, your age, and your income. Some people are exempt from the penalty entirely, and others may owe nothing because the penalty amount is capped at the cost of the cheapest bronze-level health plan available in your area.

You do not pay this penalty upfront. Instead, it is calculated when you file your federal income tax return, and you either owe it as part of your total tax bill or it reduces any refund you would have received. If you owe the penalty, you can pay it with your tax return or set up a payment plan with the IRS if you cannot pay in full.

Key Takeaways

  • The shared responsibility payment is a federal tax penalty owed to the IRS if you lack may have access to health insurance for one or more months in a year.
  • The penalty amount is the greater of a flat dollar amount per person or a percentage of your household income, but it is capped at the national average cost of a bronze health plan.
  • You are exempt from the penalty if you have a hardship exemption, may have access to for a religious exemption, are a member of a health-sharing ministry, or fall below the income threshold for filing taxes.
  • The penalty is calculated when you file your tax return, not paid separately, and you can pay it in full or request an IRS payment plan if you owe.

How the penalty amount is calculated

The IRS uses a formula with two parts: a flat dollar amount per person and a percentage of your household income. The penalty is whichever amount is higher. For tax year 2023, the flat amount is $695 per adult and $347.50 per child under 18, with a family maximum of $2,085. The percentage-based calculation is 2.5% of household income above the filing threshold.

However, the total penalty cannot exceed the national average monthly premium for a bronze-level health plan in the year you were uninsured. This cap means that even if the calculation produces a higher number, you will not owe more than that ceiling. The exact cap amount changes each year and varies slightly by region, but it is typically between $2,000 and $3,000 per person.

The penalty is calculated for each month you were uninsured. If you had coverage for even one month, that month does not count toward the penalty. If you had a gap of less than three months, you may not owe anything—the IRS allows a short gap without penalty. You report your coverage status on your tax return using Form 8965, which lists the months you had insurance and the months you did not.

Who is exempt from the shared responsibility payment

You do not owe the penalty if you fall into one of several exemption categories. The most common is a hardship exemption, which covers situations like homelessness, eviction, bankruptcy, domestic violence, death of a family member, or a serious illness. You can request a hardship exemption through the Health Insurance Marketplace or by filing Form 8965 with your tax return.

Other exemptions include being a member of a federally recognized Indian tribe, being part of a health-sharing ministry, having income below the tax filing threshold, or being incarcerated. If you are a U.S. citizen living abroad, you may also be exempt. Some people may have access to for a religious exemption if they are part of a recognized religious sect that opposes insurance.

If you believe you have grounds for an exemption, you can request it through the Marketplace during open enrollment or when you file your taxes. The IRS will review your request and notify you whether the exemption was granted. If you are denied and still believe you may have access to, you can appeal the decision.

When and how to pay the shared responsibility payment

You do not pay the shared responsibility payment separately or in advance. Instead, it is calculated as part of your federal income tax return when you file. If you owe the penalty, it is added to your total tax liability for that year. When you file your return, the IRS will show you the penalty amount, and you will either owe it as part of your tax bill or it will reduce any refund you are due.

If you cannot pay the full penalty when you file, you can request an IRS payment plan. The IRS offers short-term plans (120 days or less) and long-term installment agreements. To set up a plan, you can call the IRS at 1-800-829-1040, use the IRS website, or work with a tax professional. If you set up a payment plan, the IRS may charge a setup fee and interest on the unpaid balance.

If you owe the penalty for multiple years, each year's penalty is calculated separately and added to your total tax bill. The IRS does not combine penalties from different years into a single payment plan—you will owe for each year you were uninsured.

The difference between the shared responsibility payment and health insurance premiums

The shared responsibility payment and a health insurance premium are two separate costs. A premium is what you pay to an insurance company each month to maintain coverage. The shared responsibility payment is a tax penalty you owe to the IRS only if you do not have coverage. You cannot use one to pay for the other, and owing the penalty does not give you any health insurance protection.

If you are uninsured and owe the penalty, you are still responsible for paying any medical bills you incur out of pocket. The penalty does not cover medical expenses—it is purely a financial consequence of not having insurance. This is why many people find it more cost-effective to purchase coverage through the Health Insurance Marketplace, especially if they may have access to for subsidies based on income.

State-level shared responsibility payments

A few states have their own individual mandate penalties separate from the federal penalty. Massachusetts, New Jersey, Rhode Island, and Vermont impose state-level shared responsibility payments if you do not have coverage. These state penalties are calculated and collected by the state tax authority, not the IRS, and are added to your state income tax bill.

If you live in one of these states and were uninsured, you may owe both the federal penalty and the state penalty. The state penalty amount and exemptions vary by state. You should check your state's tax authority website or consult a tax professional to understand what you owe at the state level.

What happens if you do not pay the shared responsibility payment

If you owe the penalty and do not pay it, the IRS will treat it like any other unpaid tax debt. The IRS can charge interest and penalties on top of the original amount owed. If the debt remains unpaid for a long time, the IRS may place a lien on your property, garnish your wages, or offset your future tax refunds to cover the debt.

However, the IRS has limited enforcement tools for the shared responsibility payment specifically. The IRS cannot criminally prosecute you for owing the penalty, and it cannot impose liens or garnishments solely for the shared responsibility payment—only for other tax debts. If you owe only the shared responsibility payment and nothing else, the IRS can offset your refund but has fewer collection options.

If you cannot pay, contacting the IRS to set up a payment plan is your best option. A payment plan stops the accumulation of additional penalties and gives you time to pay without the threat of wage garnishment or property liens.

Frequently Asked Questions

Do I owe the shared responsibility payment if I had coverage for part of the year?

No, you only owe the penalty for the months you were uninsured. If you had coverage for even one month, that month does not count. If you had a gap of less than three months between coverage periods, the IRS allows that gap without penalty. You report your coverage months on Form 8965 when you file your tax return.

Can I deduct the shared responsibility payment from my taxes?

No, the shared responsibility payment is not deductible. It is a tax penalty, not a medical expense or insurance premium. You cannot reduce your taxable income by claiming the penalty as a deduction.

What if I disagree with the penalty amount the IRS calculated?

You can dispute the penalty by filing Form 8965 with your tax return and explaining why you believe the calculation is wrong. If the IRS disagrees, you can appeal through the IRS appeals process or file a claim in Tax Court. A tax professional can help you determine whether you have grounds to dispute the amount.

Does the shared responsibility payment apply if I have coverage through my employer?

No, employer-sponsored health insurance counts as may have access to coverage. If you were covered through your job for the entire year, you do not owe the penalty. You only owe it if you had no coverage or coverage that does not meet the ACA's minimum standards.

Can I pay the shared responsibility payment before I file my tax return?

No, you cannot pay the penalty in advance. The IRS calculates it when you file your return based on your coverage status and income for that year. You can only pay it after you file and the IRS notifies you of the amount owed.