Whether you get financial help or not, health coverage is part of filing your taxes. Unless you report that you had health coverage, you may have to pay a state tax penalty. If you received federal or state financial help, you'll report that as well.
Yes. Most people with Medi-Cal have coverage that counts as MEC and they will not face a tax penalty. However, there are individuals who have limited Medi-Cal coverage that does not meet MEC.
You can deduct on Schedule A (Form 1040) only the part of your medical and dental expenses that is more than 7.5% of your adjusted gross income (AGI). This publication also explains how to treat impairment-related work expenses and health insurance premiums if you are self-employed.
You will not need to send the IRS proof of your health coverage. However, you should keep any documentation with your other tax records. This includes records of your family's employer-provided coverage, premiums paid, and type of coverage.
The fee for not having health insurance (sometimes called the "Shared Responsibility Payment" or "mandate”) ended in 2018. This means you no longer pay a tax penalty for not having health coverage. If you don't have health coverage, you don't need an exemption to avoid paying a tax penalty.
The Health Insurance Marketplace® uses annual household income and other information to decide if you qualify for savings on health coverage through the Marketplace (like the premium tax credit) and other cost savings, like lower copayments, coinsurance, and deductibles (also called cost-sharing reductions).
Having a portion of your income allocated toward a pre-tax health benefit can save you up to 40% on income and payroll taxes for that portion. Also, pre-tax medical premiums are excluded from federal income tax, Social Security tax, Medicare tax, and typically state and local income tax.
The deduction value for medical expenses varies because the amount changes based on your income. The IRS allows all taxpayers to deduct their total qualified unreimbursed medical care expenses that exceed 7.5% of their adjusted gross income if the taxpayer uses IRS Schedule A to itemize their deductions.
Providers have cited Medi-Cal's low payment rates as a barrier to their participation in the program and sued the state on the basis that the fees violate federal Medicaid payment standards. Language and cultural gaps in access to care and gaps in rural access are additional issues.
What is Estate Recovery? The Medi-Cal Estate Recovery program must seek repayment from the estates of certain Medi-Cal members after they die. Repayment only applies to benefits received by these members on or after their 55th birthday and who own assets at the time of death.
Income-based Medi-Cal counts most types of earned and unearned income you have. However, some income is not counted, including Supplemental Security Income (SSI) benefits and some contributions to retirement accounts.
If you receive a tax credit through Covered California, you must file taxes for that benefit year. You will receive a 1095-A form, which shows how much Covered California paid to your insurance company to help with the cost of your health coverage. You will use the information on your 1095-A to fill out IRS Form 8962.
If you didn't receive all of the premium tax credit you were entitled to during the year, you can claim the difference when you file your tax return. Report any changes in your income during the year to the Marketplace, so your credit can be adjusted and you can avoid any significant repayments at the end of the year.
Yes. In some cases, the information on the corrected Form 1095-A may be in your favor – it may decrease the amount of taxes you owe or increase your refund.
Form 1095-B Basics
Most Medi Cal coverage is considered MEC. Your Form 1095-B shows your Medi-Cal coverage and can be used to verify that you had MEC during the previous calendar year. You can use this information to complete your state and/or federal income tax returns.
The Medicare tax is a tax charged to individuals in order to fund the Medicare system. The tax is charged to people on their paychecks, much like the Social Security tax. The Medicare tax rate is 2.9% which is split between the employer and the employee.
Medi-Cal Is a Sizable Portion of the State Budget.
The enacted 2024‑25 budget provides $161 billion for Medi-Cal, roughly half of which is funded by the federal government and the remaining covered by state and local sources.
Claiming medical expense deductions on your tax return is one way to lower your tax bill. To accomplish this, your deductions must be from a list approved by the Internal Revenue Service, and you must itemize your deductions.
The IRS will know you have health insurance if you use a 1095 to file your taxes. If you don't have health insurance, you will not be penalized by the IRS.
Health plans
If an employer pays the cost of an accident or health insurance plan for his/her employees (including an employee's spouse and dependents), then the employer's payments are not wages and are not subject to social security, Medicare, and FUTA taxes, or federal income tax withholding.
Owe taxes if you used more of the premium tax credit than you qualified for in 2024. You'll have to report the excess amount on your 2024 tax return by filing Form 8962, Premium Tax Credit (PDF, 115 KB). Find instructions for Form 8962 (PDF, 348 KB).
Financial Eligibility
MAGI is the basis for determining Medicaid income eligibility for most children, pregnant women, parents, and adults. The MAGI-based methodology considers taxable income and tax filing relationships to determine financial eligibility for Medicaid.
One of the most common proofs is a pay stub. If you submit a pay stub, make sure that it is current and within the last 45 days; otherwise, Covered California may not accept it.