Question: If someone has a giant loss carry forward, like 500K, it’s going to take a while for that to no longer show on line 37. So would that person virtually be on Medi-Cal forever, or for subsidy eligibility, do loss carry forwards only count in the year in which the loss occurred?
Answer: Loss carry forwards do not only count in the year in which the loss occurred. There are two types of loss carry forwards and I am not sure which one you are referring to. A net operating loss (“NOL”) can be carried forward to offset future operating income for up to 20 years following the NOL year. A capital loss can be carried forward to offset capital gains or reduce ordinary income by a maximum of $3,000 per year indefinitely. As such, a NOL carry forward like $500,000 could count for 1 or 20 years whereas a capital loss like $500,000 could count for 1 to 167 years. Both types of loss carry forwards reduce a household’s modified adjusted gross income which is used to determine subsidy eligibility.
Thank you Steven C Stasoiski, Health Insurance and Tax Professional from Seal Beach, CA for this answer.