As COVID-19 affects employment nationwide, more New Jerseyans will need to make strategic decisions about health insurance and tax filing this year. Marketplace insurance and MAGI Medicaid are based on your 2020 Modified Adjusted Gross Income (MAGI). There is special enrollment for a change in employment status. MAGI will include any unemployment you collect as well as any distributions from retirement plans (but not loans from those plans). When you apply, you are essentially giving the government an “honest guess” of your income for the year, and if your guess is off, it will be reconciled on your 2020 return in the first quarter of 2021.
How you file your return is also a strategic decision. If you’re under 26, it might not have mattered that your parent claimed you as a dependent, because you were on their insurance. Now, there is the possibility of a cash payment under the CARES Act, and the parent may no longer have a health plan that can cover you. So, filing your own return for 2020 and getting Marketplace or Medicaid insurance needs to be immediately considered. Additionally, now that the filing deadline has been extended to July, you may want to review your dependent status on any 2019 return as well.
As if things weren’t complicated enough, you might be able to change your MAGI income with a strategic 401k distribution to put you in an income bracket outside of Medicaid eligibility but within income limits for Marketplace insurance subsidies. This might be best if you’re over 55 because Medicaid would put a lien against assets at death for those amounts they laid out–private insurance doesn’t do this.
In short, it’s a lot to take in; and frankly, it might be time for a family meeting! We’re here to help! Call us at 732-382-6070.