How does Gift Income & Charity contributions count towards
MAGI – Modified Adjusted Gross Income
for Covered CA Subsidies – Medi-Cal?

Introduction – Gift Income?

• The person who receives a  gift does not have to claim the gift on their income tax, thus gifts don’t count for Covered CA subsidies, or MAGI-Medi-Cal Qualification.
• The giver of the gift  does not have to pay tax on gifts that are less than the annual exclusion limit, which generally changes every year.
  • What is a Gift Tax  Trout Accounting.com 
• Thus, if you don’t have to show the gifts on your 1040, it’s not MAGI income for Covered CA.
• Gift Tax: The Tax Implications of Supporting Adult Children  Tax Act.com 
• We are not attorney’s or tax advisers – double check with your professional adviser or VITA Volunteers Income Tax Assistance.

The following are nontaxable gifts:

• The general rule is that any gift is a NON taxable gift.
• Gifts that do not exceed the annual exclusion for the calendar year,
• Tuition or medical expenses you paid directly to a medical or educational institution for someone,
• Gifts to your spouse
• Gifts to a political organization for its use, and
• Gifts to charities.
  • Trump Big Beautiful Bill  Section 70424 creates a permanent deduction for taxpayers who do not itemize, capped at $1,000 ($2,000 for joint filers). This does not include contributions to donor-advised funds.  –  This allows more people to be able to give.  COF.org *
    • Above-the-line charitable contribution deduction ($1,000/$2,000) with caps on individual and corporate donations.
    • Explanation: Includes an above-the-line charitable contribution deduction, allowing non-itemizing taxpayers to deduct up to $1,000 for individuals and $2,000 for joint filers.
    • Caps the annual tax deduction for individual charitable contributions at $400,000 for single filers and $800,000 for joint filers and limits the tax deduction for corporate charitable contributions to 10% of a corporation’s taxable income, with any excess contributions also eligible for a five-year carryforward.
    • Impact: Encourages charitable giving among lower- and middle-income taxpayers who do not itemize. However, limits on individual and corporate charitable giving could discourage large donations to nonprofits.  NAIFA *
• Annual Exclusion. For 2024, the annual exclusion is $18,000. Most gifts are not subject to the gift tax. For example, there is usually no tax if you make a gift to your spouse or to a charity. If you give a gift to someone else, the gift tax usually does not apply until the value of the gift exceeds the annual exclusion for the year.
• No Tax on Recipient. Generally, the person who receives your gift will not have to pay taxes on it.
• Gifts Not Deductible. Making a gift does not ordinarily affect your taxes. You cannot deduct the value of gifts you make (other than deductible charitable contributions).
• Forgiven Debt and Certain Loans. The gift tax may also apply when you forgive a debt or give a loan that is interest-free or below the market interest rate.
• Gift-Splitting. You and your spouse can give a gift up to $28,000 to a third party without making it a taxable gift. You can consider that one-half of the gift be given by you and one-half by your spouse.
  • Filing Requirement. You must file Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, if any of the following apply:
    • You gave gifts to at least one person (other than your spouse) that amount to more   than the annual exclusion for the year.
    • You and your spouse are splitting a gift. This is true even if half of the split gift is less than the annual exclusion.
    • You gave someone (other than your spouse) a gift of a future interest that they can’t actually possess, enjoy, or from which they’ll receive income later.
    • You gave your spouse an interest in property that will terminate due to a future event.
      • Source Publication 559, Survivors, Executors, and Administrators.

Educational and Medical Exclusions

• Payments that you make on someone’s behalf for qualified tuition or medical expenses do not count towards the annual limit for gift tax purposes.
• However, your payment(s) must be made directly to a qualifying educational organization or medical care provider in order to qualify for the exclusion. You can also place funds directly into a 529 education savings plan to avoid the gift tax — but note that certain rules apply.  ^{IRS.com (NOT a government Site!)}

FAQ

• Question – How can I transfer property to my children, while I’m alive, without gift and estate taxes or  increasing Property Taxes?
  .
• Answer : Under Proposition 19, 13, 58  your home and other properties… up to $1m can be transferred to your children without increasing property taxes.
  • Adding a family member to the deed as a joint owner for no consideration is considered a gift of 50% of the property’s fair market value for tax purposes. If the value of the gift exceeds the annual exclusion limit ($18,000 for 2024) the donor will need to file a gift tax return (via Form 709) to report the transfer.
  • However, they will not likely owe gift tax due to the unified gift and estate tax exemption, which is $13.61m  for 2024. Additionally, each owner will have to adjust their basis in their respective ownerships interests on the date of the transfer.
    • Learn More
      • Fact Sheet *
      • video *
      • San Francisco Assessor *
      • Gifting Real Estate to Children Attorney *
      • Use a living trust *
      • TRANSFERRING PROPERTY TAX BASE IN CALIFORNIA: EVERYTHING YOU NEED TO KNOW
      • cnb.com gifting-a-house-to-a-child
      • H & R Block
      • smart asset.com/california-gift- and estate tax
      • See our webpage on Estate Taxes.
• Question Will a letter from someone saying they will gift me $X amount by Y [December 31st] if I don’t make [enough] equivalent money [MAGI Income *** Line 37 1040] from my own business to qualify for Covered CA subsidies, rather than MAGI Medi-Cal be sufficient for proof of income?
  • If so, what are the minimum requirements for X and Y?
    .
    .
• Answer First of all, gifts do not count towards MAGI Income as it doesn’t get reported on your 1040. Learn More—- IRS Publication #525 Page 32
  • 2nd the minimum one needs in MAGI Income for 2016 is excess of 138% of Federal Poverty Level. Please use our FREE Quote Engine and play with the numbers to do the calculation. One can also view a chart by clicking here.
  • For a single person, Silver 94 would require xxx  MAGI income. Do NOT rely on this number!!! It all washes out at the end of the year when you file taxes.
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