Covered CA Application FAQs

What Income should I Include on my Covered California Health Insurance Application?

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.

  • If you are receiving Social Security, Foreign Earned Income or Tax Exempt Interest then you must add the non taxable portion of these types of income to your Adjusted Gross Income in order to calculate what is known as your Modified Adjusted Gross Income (MAGI).
  • If your current income level has significantly changed from your most recent Tax Return, then you should use your most current pay stubs, profit & loss statements (if self-employed), or any current documentation (i.e. bank statements) that can prove your current income level.

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 income.
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.


What's countable income for Covered CA? What to Count, Not Count and Deduct

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
Workers’ Compensation No No    
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    
In-kind income No No    
Veterans' education benefits No No    
Loans 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.


Are Social Security Retirement Benefits included as part of my household income for Covered California? 

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.

  • Non-taxable Social Security benefits, which can be determined by subtracting line 5b from line 5a on the 1040.
  • Tax-exempt interest (Line 2a on Form 1040)
  • Foreign earned income & housing Deduction for Americans living abroad (Lines 45 & 50 on Form 2555)

How do I calculate my 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.

  • Start with your Adjusted Gross Income (line 7 on Form 1040)
  • Add any Tax-Exempt Interest (Line 2a on Form 1040)
  • Add any Foreign Income & Housing Deduction amounts (lines 45 and 50 on Form 2555)
  • Add the Non-taxable Social Security benefits, which is the difference from subtracting line 5b from line 5a on Form 1040

Do I need to add my dependent’s income to my Modified Adjusted Gross Income (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.


Can I claim my dependents that live outside the United States using their ITIN (Individual Taxpayer Identification Number) to help increase the amount of Tax Credits I qualify for?

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.

  • If under 6 years of age:
    A U.S. medical record that lists the applicant’s name and U.S. address.
  • If at least 6 years of age but under 18 years of age:
    A U.S. school record that lists the applicant’s name and U.S. address.
  • If 18 years of age or older:
    U.S. school record, rental statement from a U.S. property, utility bill for a U.S. property, or bank statement that lists the applicant’s name and U.S. address.

Cover Health California and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

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