How does Gift Income 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.  In 2024  the annual exclusion is $18,000 per recipient.  In other words, you can give up to $18,000 to each of your children this year without having to pay any gift tax.
• Thus, if you don’t have to show the gifts on your 1040, it’s not MAGI income for Covered CA.
• 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.
• 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?
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• 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

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• 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?
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• 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.
  • Get Instant quote & subsidy calculation
  • Appoint us as your Covered CA broker, no extra charge.

• Question   If I have 100k in a savings account that was all gifted to me, do I have to show that savings account on my medi-cal application?
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• Answer  Does the Medi Cal application ask for assets?
  • What Medi Cal program are you applying for?
  • See our webpages on Medi Cal – MAGI and Medi Cal aged and disabled
• Yes..the Medi-Cal application does ask for savings account statement.
  • I have been on full Medi-Cal benefits for several years so they are making me re apply for continued eligibility. The gift came during that eligibility.
• If Medi Cal is asking, then you must answer.
  • If you are applying for MAGI Medi Cal, under 65, it doesn’t count as income.
  • If you are applying under Aged and Disabled, assets count, but the asset limit has greatly increased.
    • See our webpage on Medi Cal redetermination ask further questions on the most relevant page.
    • Medi-Cal – MAGI Income Eligibility Criteria

• Question I receive a tax-free gift of $14,000 every year and I earn about $2,400/year in interest income.
  • I am trying to have at least xxx income   avoid having to pay back the Covered CA subsidy (Because I would qualify for Medi-Cal with income but not qualify with assets).
  • Do you know whether the tax-free gift I receive counts as income in the eyes of CoveredCA?
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• Answer First of all, the eyes of Covered CA do not mean a thing! It’s IRS rules that count. See publication  974  I will grant that Covered CA has made a simple list of what counts as income in the upper part  of this page and gifts are not on it. See the IRS rules listed above and follow the links. I see no place where gifts count as Income.
  • Thus, you do not qualify for Covered CA subsidies. Did you comply with the rule to report changes in income within 30 days?
  • Here’s our research on if you have to pay back subsidies, if your income drops to Medi-Cal level.
  • IRS Instructions for form 8962 if your income is less than 100% of Poverty Level The IRS refers you to Publication 974 but I don’t find the relevant passage. Everything seems to send you back to the instructions for form 8962.

• Question I’d like to know if I get a gift for $5,000 cashier’s check do I have to report it to Covered  CA or  LA. Care?
  • This year I don’t have to pay for medical insurance with there help.
  • I get survivor’s from my husband’s social security and a little pension from teamsters the only reason I do income tax is for the purpose of qualifying for the LA Care – Covered CA
• Answer  Gifts don’t count as income per excerpt of Covered CA Countable Sources of Income

• Are gifts to a Medi Cal recipient for education counted as income?
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• No. See Countable Sources of income above. For legal and tax purposes check IRS publication 559