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Is tax exempt income applicable to Covered CA premiums and1095-A and Form 8962?

The majority of our income is from IHSS which was declared non-taxable per IRS Notice 2014-7.   We did not receive any W-2 for 2018 because no income was taxable.   We have Covered California and included our estimated IHSS wages in the application as income for the purposes of premium and credit calculation.   When the 1095-A data is entered for form 8962 there is a sizable Federal Refund generated.   I need to know if this is correct or if the IHSS income data (from YTD on last 2018 check stub) should be entered someplace and/or offset.

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Expert Alumni

Is tax exempt income applicable to Covered CA premiums and1095-A and Form 8962?

Medicaid Waiver payments are not included on Form 8962.  Because Medicaid Waiver payments are excludable from taxable income, they do not constitute part of your AGI or the Household income.  The following information comes from the following website:  Form 8962 Instructions

Household income. 

For purposes of the PTC, household income is the modified adjusted gross income (modified AGI) of you and your spouse (if filing a joint return) (see Line 2a, later) plus the modified AGI of each individual whom you claim as a dependent and who is required to file an income tax return because his or her income meets the income tax return filing threshold (see Line 2b, later). Household income does not include the modified AGI of those individuals whom you claim as dependents and who are filing a 2018 return only to claim a refund of withheld income tax or estimated tax.

Modified AGI.

For purposes of the PTC, modified AGI is the AGI on your tax return plus certain income that is not subject to tax (foreign earned income, tax-exempt interest, and the portion of social security benefits that is not taxable). Use Worksheet 1-1 and Worksheet 1-2 to determine your modified AGI.  (Italics added.  Medicaid Waiver Payments are not included as cetain income that must be added back in to determine modified AGI).

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