Covered California and Your Health Care Tax Credit

Although the Open Enrollment for Covered CA is finished, important details continue to emerge with regard to the tax credits many are receiving.  Here is some useful information, and links to important tools to help you understand your obligations under the law.

Important Links:

Important Details:  

  1. The tax credit is based on your projected Modified Adjusted Gross Income for 2014.  The U.C. Berkeley Law Center published a paper on the MAGI to help people understand how to calculate your income.  Covered CA has provided this document to applicants as well.  We recommend that you download the document for review if you are calculating your estimate or need to re-examine your stated projections.
  2. If your income changes, you need to report the change to Covered CA.  A change may affect your tax credit.
  3. If your income goes up, you may have to pay back some of the tax credit you have received.  To avoid this, you must report changes to your income to Covered CA.   According to the Federal Register: 
    1. § 1.36B–4 Reconciling the premium tax credit with advance credit payments. (a) Reconciliation—(1) Coordination of premium tax credit with advance credit payments—(i) In general. A taxpayer must reconcile the amount of credit allowed under section 36B with advance credit payments on the
      taxpayer’s income tax return for a taxable year. A taxpayer whose premium tax credit for the taxable year exceeds the taxpayer’s advance credit payments may receive the excess as an income tax refund. A taxpayer whose advance credit payments for the taxable year exceed the taxpayer’s premium tax credit owes the excess as an additional income tax liability.
  4. Consult your tax advisor.  Your tax advisor is the person best suited to help you determine your estimated income.  RealCare provides useful resources and information, but we are not tax advisors.  We urge our clients to seek professional advice in this area.