Generally, the projected annual income on your Covered California application should match your Adjusted Gross Income (line 8b of the 1040) from your most recent Federal Tax Return. This is the recommended method if your annual income stays at a constant level from year to year. However, there are a few instances where using the Adjusted Gross Income listed on your most recent Tax Return will not be accurate.
Keep in mind that the annual income listed on your Covered California application is a projection for the same tax year you will have the Health insurance coverage. So what you earned last year should not be used unless you expect to earn
approximately the same amount. For example, if you changed jobs recently and are earning more, then you should use your current pay to estimate your income for the year rather than the previous year’s Tax Return. The good news is that you
can change the estimated income listed on your Covered California application anytime throughout the year. Actually, it is highly recommended that you report any income changes of 10% or more to Covered California within 30 days of the
event that caused your income to change (i.e. laid off, fired, raise, or new job). Reporting income changes as they occur will reduce the risk of owing back any financial assistance to the IRS due to underestimating your annual
Please feel free to contact us at (818) 350-2675 with any further questions or if you would like free assistance in completing the income portion of your Covered California Health Insurance application properly. Below is a very useful chart that explains what types of income you should include on your Covered California Health Insurance application. The chart below also lists several qualified income deductions and highlights which line on your Federal Tax Return to reference in order to locate these deductions and various types of income.
|Where to find on Tax Return|
|Type of Income||Covered CA Eligible||Medi-Cal Eligible||2018||2019|
Count as Income?
|Wages, salaries, tips||Yes||Yes||Line 1 - 1040||Line 1 - 1040|
|Government benefits (CalWORKs, adoption/foster cre assistance, disaster belief, relocation assistance)||No||No|
|Self-employment income||Yes||Yes||Line 12 - Schedule 1||Line 3 - Schedule 1|
|Unemployment Insurance Benefits||Yes||Yes||Line 19 - Schedule 1||Line 7 - Schedule 1|
|State Disability Income (SDI)||No1||No1|
|SS Retirement, Survivors or Disability Benefits (Title II)||Yes2||Yes2||Line 5a - 1040||Line 5a - 1040|
|Social Security Income (SSI)||No||No|
|Child Support Received||No||No|
|Alimony Received: Only include if the divorce or separation instrument was executed on or before 12/31/18. No longer considered income for any divorce or separation instrument modified on or after 01/01/2019||Yes||Yes||Line 11 - Schedule 1||Line 2a - Schedule 1|
|Interest (Taxable & Tax Exempt)||Yes||Yes||Line 2a & 2b - 1040||Line 2a & 2b - 1040|
|Veteran’s service-related disability benefits, pension, annuity||No||No||IRS Pub. 525||IRS Pub. 525|
|Rental Income||Yes||Yes||Line 17 - Schedule 1||Line 5 - Schedule 1|
|Capital gains/loss||Yes||Yes||Line 13 - Schedule 1||Line 6 - 1040|
|Dividends||Yes||Yes||Line 3b - 1040||Line 3b - 1040|
|Tax refunds||Yes||Yes||Line 10 - Schedule 1||Line 1 - Schedule 1|
|Gifts and Inheritances||No||No|
|Lump Sums Received (e.g., lottery winnings)||Yes||Yes||Line 21 - Schedule 1||Line 8 - Schedule 1|
|Retroactive SS benefits||Yes||Yes||Included in Line 5a - 1040||Included in Line 5a - 1040|
|Scholarships, fellowship grants and awards used for education purposes||No||No||See IRS Pub. 970; 45 CFR 233.30|
|Work Study Income||Yes||No|
|Veterans' education benefits||No||No|
|Taxable amount of pension, annuity or IRS distributions (incl non-service related veteran’s benefits)||Yes||Yes||Line 4a - 1040||Line 4b & 4d - 1040|
|American Indian and Alaska Native (AI/AN) income||No||No||42 CFR §436.603(e)(3)||42 CFR §436.603(e)(3)|
|Farm Income||Yes||Yes||Line 18 - Schedule 1||Line 6 - Schedule 1|
|Foreign Earned Income (taxable and non-taxable)||Yes||Yes||Lines 45 and 50 of Form 2555 or line 18 of Form 2555-EZ||Lines 45 and 50 of Form 2555|
Deduct from Income?
|Child Support Paid||No||No|
|Alimony Paid: Only Deduct if the divorce or separation instrument is executed on or before 12/31/18. Not a deduction for any divorce or separation instrument modified on or after 01/01/2019||Yes||Yes||Line 31a - Schedule 1||Line 18a - Schedule 1|
|Student loan interest paid||Yes||Yes||Line 33 - Schedule 1||Line 20 - Schedule 1|
|IRA deduction||Yes||Yes||Line 32 - Schedule 1||Line 19 - Schedule 1|
|Health Savings Acct (HSA)||Yes||Yes||Line 25 - Schedule 1 Form 8889||Line 12 - Schedule 1 Form 8889|
|Health insurance premiums (self- employed)||Yes||Yes||Line 29 - Schedule 1||Line 16 - Schedule 1|
|Moving expenses for members of the Armed Forces||Yes||Yes||Line 26 - Schedule 1 Form 3903||Line 13 - Schedule 1 Form 3903|
|Tuition/fees expenses: As part of the Appropriations Act of 2020, Congress retroactively reinstated the above-the-line deduction for 2018 through 2020. See IRS Pub. 970 for more details.||Yes||Yes||Line 34 - Schedule 1 Form 8917.||Line 21 - Schedule 1 Form 8917|
|Educator expenses||Yes||Yes||Line 23 - Schedule 1||Line 10 - Schedule 1|
|Renter’s credit (CA tax return)||No||No||CA 540 - Line 46||CA 540 - Line 46|
|Business expenses for artists||Yes||Yes||Line 24 - Schedule 1 Form 2106||Line 11 - Schedule 1 Form 2106|
|Penalty on early savings withdrawal||Yes||Yes||Line 30 - Schedule 1||Line 17 - Schedule 1|
|Deductible part of Self-Employment Tax||Yes||Yes||Line 27 - Schedule 1 Form SE||Line 14 - Schedule 1 Form SE|
|Self-employed SEP, SIMPLE, and qualified plan contributions||Yes||Yes||Line 28 - Schedule 1||Line 15 - Schedule 1|
1 SDI is usually not taxable, thus not counted for MAGI (Modified Adjusted Gross Income), unless it is a substitute for unemployment compensation (which occurs when an individual begins receiving unemployment
benefits and then becomes no longer eligible because he/she becomes disabled).
2 Please reference the question below regarding Social Security Retirement Benefits because only a certain portion is included in your adjusted gross income.
Yes, the following types of income should be added to the Adjusted Gross Income (line 7 on Form 1040) listed on your Tax Return in order to determine your Modified Adjusted Gross Income (MAGI) for Covered California.
For most individuals, your Adjusted Gross Income (line 7 on Form 1040) is the same as your Modified Adjusted Gross Income (MAGI) unless you are receiving Social Security, Foreign Earned Income or Tax Exempt Interest. If you are receiving any these types of income, then please use the calculation method below to determine your MAGI for Covered California.
Yes, but only if your dependent is required to file a Tax Return because their income meets the Income Tax Return Filing Threshold. For 2018, the Income Tax Return Filing Threshold was $1,050 for unearned income (e.g. interest & dividends) and $12,000 for earned income (e.g. Wages, salaries & tips).
You do not include the income of any dependents who are filing a Tax Return only to claim a refund of tax withheld or estimated tax.
If your dependent’s income meets the Income Tax Return Filing Threshold, then you would add their MAGI to yours in order to determine the household MAGI that should be used for Covered California. In some instances, you may receive more tax credits through Covered California if you choose to no longer claim a dependent that is earning more than the Income Tax Return Filing Threshold.
Only if you are able to prove U.S. residency for those dependents. The Tax Cuts and Jobs Act of 2017 (aka Trump Tax Reform bill) added this requirement.
For tax years beginning after 2017, ITIN applicants claimed as dependents must also prove U.S. residency unless the applicant is a dependent of U.S. military personnel stationed overseas. A passport that doesn’t have a date of entry won’t be accepted as a stand-alone identification document for dependents. In these cases, applicants will be required to submit at least one of the following original documents in addition to the passport to prove U.S. residency.