California health insurance -
Obamacare income guidelines in CaliforniaStep by Step Covered Ca
Income Calculation

We have written extensively how the tax credit do or die with Covered
California and health insurance in general now.
Guess what drives the tax credit...
It's Income!
But what income and whose?
We've helped 1000's of people enroll with tax credits and the income piece is
always the trickiest part.
Lots of confusion and headaches.
Let's erase that confusion and rather than the usual tax form bomb that you
usually get, why don't we walk through each piece step by step.
Of course, you can always call us at 800-320-6269 for specific income
questions.
As Certified Covered California agents, our services are 100% free to you.
Let's get started. It can mean $1000's per year in tax credits.
The Covered Ca Income Quick Summary
We're going to break down the income piece into three separate questions.
Whose Income
What Period of Time
What Income
This addresses 99% of the questions we come across.
First, why even ask the questions?
Income is the primary driver of tax credit now. It's on a
sliding scale so as your income goes down, your tax credit should go up.
You may also get richer benefits for the same price as the normal plan as
income hits certain thresholds.
This can be a huge deal especially with the Silver 87 and 94.
Here are the main income levels by size of household (we'll discuss this in
the "Who" section below).

The tax credit itself is called an Advanced tax credit which means you get
the money monthly (no waiting for April).
Why be as accurate as possible?
No surprises!
That's our goal with everyone we help.
Here's the deal.
If your income is higher than we submitted to Covered Ca, you may have to
pay back part or all of the tax credit in April the following year.
Let's avoid that.
Conversely, if your income is lower, you're not getting the full monthly tax
credit that you should be getting.
You may also be missing the Enhanced Silver benefits.
Equally bad.
What if income changes or if we won't know the estimate until later in the
year (very common...think retail self-employed)?
We can always adjust the yearly income estimate during the year.
In fact, as Certified Covered Ca agents, you can just email us the update (as
with any other updates) and we'll handle it on this side.
Just call us at 800-320-6269 for this free service.
The system can be a bit squirrelly so let us help with this piece.
Again, the goal is maximizing tax credit and avoiding surprises.
Alright, let's jump into the big questions on income. You can always run your
Covered Ca quote here with tax credit calculation to test different income
levels.
So whose income do we look at?
Whose Income for Obamacare Calculation?
Covered Ca throws around "Household" a lot in the discussion.
What exactly does this mean?
The easiest answer is that their definition of household is everyone that
files together on one 1040 tax form.
One note...married couples must file Jointly to get the tax credit.
We have many enrollees that claim grandmothers, grandson, you name it.
That's fine as long as you claim them on your 1040 tax form as a dependent,
they are part of the household.
Even if they live somewhere else.
Net net...the 1040 tax form is king in determining whose income to include in
our total.
What about households in transition.
Let's say you're getting married in June (congratulations!).
You would then treat household according to how you expect to file the
following April.
In this case, you would file married jointly (if jointly) and therefore you
estimate your income based on the married couple.
This is true even if you start the year single.
The same is true for divorce, baby additions, older dependents planning to
file their own taxes, etc.
Think "How many people will file together next April?".
If you have older dependents (children or otherwise), we would include their
income as well.
Of course, we're happy to help you analyze this piece at 800-320-6269.
We
generally save people about 45 minutes to 1 hour in the process of tax credit
calculation and enrollment.
Not kidding (unfortunately). We also make sure you get the correct amount and
our services are free.
Run your quote with tax credit calculation here:

Okay, so that's the who.
Let's talk about the "When".
What Period of Time for Obamacare Income Calculation?
The "When" can be confusing as well.
We want to estimate the income for the current year.
Essentially, what we plan to show on next April's tax return.
For example, if we're February of 2017, we would want to estimate what will
show on our tax return in April of 2018 (for the 2017 year).
This is inherently tricky for many people.
Think self-employed.
Better yet, self-employed retail.
Still better, self-employed, retail, with 50% of revenue based on Holiday
traffic.
For many people, it's really hard to estimate that far out in terms of
income.
We can always adjust the income estimate during the year as we get better
info.
In fact, we make it easy!
Rather than fight the system (careful, it can cancel coverage if not done
correctly), just email us the updated income estimate and we'll correct on this
side.
Our services are free so take advantage.
If our income really changes year to year, try to be conservative.
I'll explain the ramifications of our income being way off.

Each tax filing, we'll receive a 1095 form from Covered Ca.
It will basically spell out our received tax credit.
When we file taxes, the IRS compares what we received versus what we should
have received.
If our income estimate is too high
This isn't too bad but not ideal.
You don't lose the tax credit if we overshoot our income estimate. You'll
recoup it at tax time.
That's not bad!
It's probably better on cash flow to have the tax credit monthly but hey,
we'll get it at tax time.
The down side is that we might have been eligible for the Enhanced Silver
benefits.

This can mean much richer benefits for the same price of the normal Silver
plan.
Much Richer for the Silver 87 and 94!
We don't want to lose out on that so let's get the best estimate.
One other note, there's a threshold below which we are eligible for Medi-cal.
For a single person, it's right around $17K.
What if you estimate $18K but end up at $14K (medi-cal area).
Officially, there's a $300 penalty for this situation but we haven't seen the
IRS actually apply it.
That makes sense since it's so hard to estimate a full year out and you're
basically kicking people when they're down (income at poverty level and lower
than expected).
Just know there is a penalty out there...hopefully they continue to continue
with current, rational approach (and forget about it).
If our income estimate is too low
We don't want to be here.
Let's say we estimated $20K and actually made $35K at tax time.
Many things can cause this.
- failure to update income estimate during the year
- not using gross income
- windfall payments
Let's say we received tax credits of $3000 for the year but were eligible for
$2000 based on higher income.
Bam! You'll have to pay back a percentage of the $1000 extra tax credit and if your
income goes over the cap ($47K for individual), you'll have to pay it all back!
You won't have to pay back the Enhanced Silver benefits if those were used.
Let's get the estimate right. Let's avoid any April surprises.
Call us at 1800-320-6269 or run your Covered Ca quote here. Our services as
Certified Covered Ca agents are free to you.
Now....on to the real reason we're all here. What income?
What income for Obamacare Calculation
Here's the part that usually causes the most trouble.
Here's the short cut answer.
Look at line 7 on the 1040 tax form for the income to consider.
This is the Adjusted Gross Income and it's where we want to focus.
There are a few items to add to this but they're more rare.
These include:
- Tax-free interest
- foreign income
- Social Security (not disability)
Again, last year's line 7 is only a guide. We actually want to estimate what
line 7 will be next April.
Let's break it down into the two key groupings (W2 or self-employment) and
then we'll look at the other less-common sources of income.
W2 Income
This is normal income you get from a paycheck. It comes via the w2 form from
your employer.
It does not include 1099 contract work which is essentially self-employed in
the eyes of the IRS.
So what do we use from the w2?
We need to look at Gross income. This is what Covered Ca will consider.
If you have multiple W2's, try to estimate what the total will be for the
year. Again, line 7 on the next 1040 tax form.
W2 is pretty straight forward. Of course, we can help with any questions at
800-320-6269. Our services are free to you as Certified Covered Ca agents.
What about self-employment income?
Self-employment income
This gets trickier. Of course.
Again, if your income doesn't change much from year to year, the prior 1040
form will be a good indicator.
Otherwise, we need to estimate out what our NET self-employment income will
be.
Here are the key components we see:
- Your net business income after business deductions
- 100% of health insurance premium for self and dependents (not to exceed
taxable income)
- 1/2 of self-employment tax deduction
We'll talk about the deductions later on but these are the three that are
common for self-employed.
Estimating can be tough for self-employed people.
Go with your best estimate and if it really bounces around, there are two
options.
- Go conservative (lower) on estimate and recoup extra tax credit the
following April
- Go more aggressive and potentially pay back a % or all of tax credit next
April
Here's the thing.
It's actually called an Advanced Tax Credit.
This means you get the tax credit now!
It's deducted monthly from your premium amount and everything settles up the
following April.
If your income comes in lower, you'll get the extra tax credit you were
eligible for in April.
The opposite is also true (and not a fun surprise).
Keep in mind that you may be missing out on the Enhanced Silver plans if you
go more conservative.
Important note: For self-employed people, there are deductions in line 23-35
of the 1040 that help.
The two most common are health insurance premium (for you and dependents) and
1/2 of the self-employment tax.
This should all figure into the 1040 but make sure to include it in your
estimate!
Let's look at the one-offs that come up frequently once we have the w2 and
self-employment income figured out.
Again, almost all these items should figure into the line 7 (except for
tax-free interest, Social Security, and foreign income).
Additional Income Considerations
Social Security
If you take Social Security early, we need to include it in our incomes
estimate. This will usually be in addition to your line 7.
Social Security disability is generally not included.
Unemployment
Unemployment income is included in our Estimate. Try to estimate your annual
expected income if it's going to end.
Disability
We would include disability income if it ended unemployment.
Rental Income
You'll see this above line 7 but just in case, use your net rental income
(after costs associated with this revenue stream).
401K's, Pension Payouts, etc
This item might be worth a quick check with your accountant since there are
so many different situations.
The net net is this...is the disbursement subject to tax?
If so, we include it.
Spending down assets (bank accounts, retirement accounts, etc) are generally
not taxed and do not figure into our calculation.
Run your instant quote with tax estimate here:

Common deductions for income estimate
Here are the main deductions to consider.
Line 23 - 35 on the 1040
Make sure to look at prior year's 1040 for line 23-35.
There are some gems here but the most common ones we see are:
- Moving expenses
- Tuition/fees and/or Student loan interest
- Self-employed health insurance
Make sure to take advantage of these when estimating income.
Only look at the current year in question. For example (Jan - Dec 2015 to
show on April 2016 tax return).
Income Estimate Wrap Up for Covered Ca Tax Credit
Okay...lots of information.
If tax forms are not your cup of tea (we'd be worried if the were), we can
help you.
In about 5 minutes, we can quickly size up your estimate, calculate your full
tax credit, and compare the health plans.
It's fast, easy, and free to you since we're Covered Ca Certified Agents.