Question: My Mom has been receiving health care under Covered California since January 1st. She can no longer afford the home she is in and must sell to continue to live. From the sale she will make some money which she will need to live. Will this be considered income even though this will be a one time occurance? If this is so, then she will become disqualified for assistance. Am I correct?
Answer: Any profit above $250,000 will go into her adjusted gross income for the 2014 tax year. (Your mom can exclude from tax up to $250,000 in profit from the sale of her primary residence or $500,000 if she's married as long as she has owned and lived in the home for a minimum of two years.) So selling the home will have no effect at all. If the sale of the home raises her AGI, the advance tax credits she has received to help pay her 2014 health insurance premiums will be reconciled by the IRS when she files her 2014 tax return. Any undue advance tax credits will be added to her 2014 taxes due. This should not be a problem for your mom since she will have the cash from the sale of the home to take care of the additional taxes if there are any. She is not "disqualified" for health insurance premium assistance and she will continue to be eligible for subsidized coverage or Medi-Cal the following year based on her 2015 income.