Net Operating Loss (NOL) Publication # 536
Net Operating Loss (NOL) Publication # 536

If one has a tax loss and shows a negative number for line 37 MAGI income   on their 1040

can they get subsidies in Covered CA,

What if they have income from a job, rentals, business or other?

First, let’s look at the definition of MAGI income on that webpage or the definition in Publication # 974

Modified AGI.  MAGI For purposes of the PTC, modified AGI is the AGI on your tax return (line 37 of 1040) 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)
Second –  To be an applicable taxpayer, you must meet all of the following requirements.
a. For 2015, your household income is at least 100% but no more than 400% of the Federal poverty line for your family size (see Line 4 in the Form 8962 instructions) – Publication 974 page 4 – However, if Covered CA (Market Place) estimated your income qualifies and actually gave you a subsidy APTC then you can take the credit.  Draft 2015 Publication # 8962 Page 7
However, IMHO check with competent tax and legal counsel, with a tax loss and it lowers line 37 and you don’t have the add ins for MAGI income, you can’t get subsidies.

A tax loss occurs when total expenses are greater than total revenues under the tax reporting rules of the applicable government jurisdiction. A tax loss reduces an entity’s tax liability only in proportion to its tax bracket.

Businesses and individuals will frequently reduce their reportable revenues or increase their reportable expenses for tax purposes in order to reduce their tax payments. Thus, an entity may report a tax loss at the same time that it reports a profit under generally accepted accounting principles or international financial reporting standards. Accounting

Be careful of taking advise over the phone, even if it’s Covered CA, Rando’s on the internet or even our prestigious website.  That’s why we endovor to link to an authoritative source for everything we say.  Here’s where someone got a $13k tax bill as Covered CA didn’t tell him he had to add his Social Security back in to get MAGI Income.
Rando's - Double Check Everything
Rando’s – Double Check Everything
Publication 974 - Premium Tax Credit - with Bookmarks
Publication 974 – Premium Tax Credit – with Bookmarks
8962 Premium Tax Credit
Income Determination - Health Care Reform Tax Facts
Income Determination – Health Care Reform Tax Facts
Covered CA - Online Application - Add Deduction - Click to enlarge
Covered CA – Online Application – Add Deduction
Instructions – 2017 Draft
Loss of  Minimum Essential Coverage as a Qualifying Event

Get quotes here for CA,  Nationwide to show premiums, benefits and potential subsidy – tax credits.

Resources, Links and Related Pages in Tax Credits » FAQ’s  Section


Our page on the  Premium Tax Credit IRS #8962 & Instructions


View our page on how the APTC Advance Premium Tax Credit is Calculated CFR §1.36 B – 3 Federal  Regulations



MAGI means different things in different Government Codes

Net Operating Losses (NOL’s) Publication # 536

If the tax loss is from your business, at least your premiums are a deduction, §106.  Self Employed take the deduction on line 29 of the 1040.

Insure Me where guy had to pay back subsidies as Covered CA didn’t add that back in for line 37 MAGI.

Insure Me inflating income to avoid Medi-Cal

Fudging the income?   Fraud & False Statements

Misstatements on Application

Do you have to pay back the APTC or take it as income?

IRS Newswire – Issue Number:    IR-2016-23

Inside This Issue

Falsifying Income to Claim Tax Credits is on the IRS “Dirty Dozen” List of Tax Scams for the 2016 Filing Season

WASHINGTON — The Internal Revenue Service today warned taxpayers to avoid schemes to erroneously claim tax credits on their returns, which is on the annual list of tax scams known as the “Dirty Dozen” again for the 2016 filing season.

Taxpayers should not falsify their income or other information on their tax returns to improperly claim tax credits,” said IRS Commissioner John Koskinen. “Misrepresenting facts is cheating and taxpayers are legally responsible for all the information reported on their tax returns.”

Compiled annually, the “Dirty Dozen” lists a variety of common scams that taxpayers may encounter anytime but many of these schemes peak during filing season as people prepare their returns or hire professionals to do so.

Illegal scams can lead to significant penalties and interest and possible criminal prosecution. IRS Criminal Investigation works closely with the Department of Justice (DOJ) to shutdown scams and prosecute the criminals behind them.

Don’t Fake Income

Some people falsely increase the income they report to the IRS. This scam involves inflating or including income on a tax return that was never earned, either as wages or as self-employment income, usually in order to maximize refundable credits.

Just like falsely claiming an expense or deduction you did not pay, claiming income you did not earn in order to secure larger refundable credits such as the Earned Income Tax Credit [or Covered CA Subsidies] could have serious repercussions. This could result in taxpayers facing a large bill to repay the erroneous refunds, including interest and penalties. In some cases, they may even face criminal prosecution.

Taxpayers may encounter unscrupulous return preparers who make them aware of this scam. Remember: Taxpayers are legally responsible for what’s on their tax return even if it is prepared by someone else. Make sure the preparer you hire is ethical and up to the task.



This is one of those unintended consequences of the PPACA.  The law says APTCs are obtainable by persons with MAGI of 100%-400% FPL.  This is a unique situation and I don’t believe Congress expected this as the norm.  But the law is the law, and the IRS will either allow or disallow the APTCs.

Personally, I think the IRS will allow the APTCs since this person is obviously a “taxpayer” not a welfare recipient.  Otherwise, it would make a great case in Tax Court.

MAX  max herr insurance

Steve:  How many will even get the chance?   Has Covered CA been overlooking it?  Even when a qualifying MAGI is put in, but line 37 is negative?   Like this reply from Covered CA — Response By Email (R) (02/10/2016 12:22 PM)  Good day Steve Shorr,   Once you update their income, and it’s reflecting the negative income then they will be up for review.  Please let me know if you need further assistance.   Does Covered CA actually review the Tax Return?  I did mention wrong information and Covered CA agreed about it not being worth the legal ramification.  Fudging the income?   Fraud & False Statements

I think this probably affects a significant number of taxpayers nationwide, and is “ripe” for adjudication in the federal Tax Court in order to have a definitive ruling.  Theoretically, MAGI Medi-Cal eligibility is a month-to-month test, not really an annual test.

Unfortunately, I don’t know any tax attorneys, but if your client is willing to take his case to Tax Court, I can probably get a referral or two from some of the insurance attorneys I have worked with.


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