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ACA/Obamacare Subsidy Calculation
Old 04-08-2013, 10:07 AM   #1
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ACA/Obamacare Subsidy Calculation

Hello all,

I am looking for some advice/help on a tax concern just uncovered. I'm trying to calculate ACA/Obamacare subsidy level income and I may need to recharacterize TIRA to Roth Conversion for 2012 as I believe the method for calculating O-MAGI is different than I expected.

My numbers:
AGI (1040 Line 37)= 45483
Foreign Tax Credit=263
No Tax-exempt interest
So I believe my O-MAGI is $45,746.

Single, and I found the 2013 poverty level is $11,490 giving a max 400% bracket of $45,960.

1) Did I just squeak by? (I forgot to calculate a $760 state tax refund in figuring O-MAGI late last year and so probably converted more than I should have);

2) Is 2013 the right figure to use? Will the ultimate number used for 2014 tax form be updated to 2014 poverty number?; and

3)Or should I just recharacterize some of the Roth conversion to be safe? Lots to consider these days...

PS-Was planning an introductory post-not how I wanted to do a first post but now I'm worried. Maybe this can help others as well. Thanks in advance for any help.

Gresh
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Old 04-08-2013, 10:28 AM   #2
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Hi Gresh, welcome to the forum.

No need to add in the foreign tax credit, it's not part of the calculation. Looks to me like your number is $45483, which is just under the 400% FPL threshold. Under current rules you appear to be safe. Now you can give us that intro post you offered.
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Old 04-08-2013, 10:29 AM   #3
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Quote:
Originally Posted by Gresh View Post
Hello all,

I am looking for some advice/help on a tax concern just uncovered. I'm trying to calculate ACA/Obamacare subsidy level income and I may need to recharacterize TIRA to Roth Conversion for 2012 as I believe the method for calculating O-MAGI is different than I expected.

My numbers:
AGI (1040 Line 37)= 45483
Foreign Tax Credit=263
No Tax-exempt interest
So I believe my O-MAGI is $45,746.

Single, and I found the 2013 poverty level is $11,490 giving a max 400% bracket of $45,960.

1) Did I just squeak by? (I forgot to calculate a $760 state tax refund in figuring O-MAGI late last year and so probably converted more than I should have);

2) Is 2013 the right figure to use? Will the ultimate number used for 2014 tax form be updated to 2014 poverty number?; and

3)Or should I just recharacterize some of the Roth conversion to be safe? Lots to consider these days...

PS-Was planning an introductory post-not how I wanted to do a first post but now I'm worried. Maybe this can help others as well. Thanks in advance for any help.

Gresh

i would go to this site and use the calculator. i think it is current

http://www.coveredca.com/calculating_the_cost.html
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Old 04-08-2013, 10:36 AM   #4
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Thanks MichaelB and gerrym51. One other thing that just entered my consciousness-this is just the estimate for initial subsidy, if any. The actual will be based on 2014 income and I can work to manage that better. I could cover the insurance amount next year and just settle up on the 2014 tax form-just a little more out of pocket next year is all.

Was sweating there for a minute after reading O-MAGI rules. Nothing to see here-move along..

Gresh
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Old 04-08-2013, 05:11 PM   #5
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This is a new twist in calculating early retirement and could very well allow many others to take advantage of a few extra years of early retirement with the proper planning. Personally my wife and I are very interested to see how this will play out as we make our final decisions on when to start the early retirement gig. We are both turning 60 this year.
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Old 04-08-2013, 06:26 PM   #6
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Originally Posted by wmc1000 View Post
This is a new twist in calculating early retirement and could very well allow many others to take advantage of a few extra years of early retirement with the proper planning. Personally my wife and I are very interested to see how this will play out as we make our final decisions on when to start the early retirement gig. We are both turning 60 this year.
It is a double edged sword. It makes it uneconomic for me to take 0% capital gains or Roth conversions from 400% FPL to the top pf the 15% tax bracket (~$30k a year) so my RMDs will be higher. OTOH my insurance costs, after the subsidy, will be ~22% lower.
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Old 04-09-2013, 05:31 AM   #7
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I see a huge opportunity for financial planners and software developers. When to start SS, 0% Cap gains, index funds vs funds that throw off income, bunching income and deductions every 3rd year or so, getting rid of partnership interests that throw off fluctuating gains, etc. All centered around staying below 400% FPL.
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Old 04-09-2013, 09:26 AM   #8
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Your subsidy will ultimately be based on 2014 numbers, you might have to put more cash up front because of your 2012 income but you get it back when you file in 2015
TJ
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Old 06-19-2013, 08:49 PM   #9
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I was led to this forum by a Google search for this same topic, but with the twist that my income is below the FPL and I would like to raise it to fall within the subsidy limits. Georgia is not planning to participate in the Medicaid expansion, and there is a part of me that would not feel comfortable taking that anyway. It is ironic that legal immigrants below the poverty level, who will not be eligible for Medicaid for five years, will be able to get subsidies, while I will not qualify.

I am currently paying medical premiums at close to 100% of my income and have been living off of savings. After seeing the medical costs incurred by my late husband (fortunately insured!), going without insurance scares the fool out of me.

I had resigned myself to continuing to pay premiums, but recently had the idea of taking an early withdrawal of some IRA funds to create taxable income of the correct poverty level for the MAGI calculation. I realize that I would take the 10% penalty hit, but a small "investment" would save hundreds each month AND greatly reduce my max out of pocket limit, saving me so much more than I would ever spend on the taxes. Or maybe a ROTH conversion would do much the same?

I ran this by the guy managing the IRA and at an initial contact with an accountant and they had no idea. I've asked an insurance agent, trying to decide which way to jump, and other than having seen one webinar, he has no insight on ACA at all. And, I am sure that talking to BCBS directly would be in my best interests.

Am I on the right track?
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Old 06-19-2013, 09:04 PM   #10
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Yes, I think you are. You could avoid the penalty by doing IRA>Roth conversions of an amount to get you just over the medicare income level. The amount converted would increase your O-MAGI.
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Old 06-19-2013, 10:51 PM   #11
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Originally Posted by pb4uski View Post
Yes, I think you are. You could avoid the penalty by doing IRA>Roth conversions of an amount to get you just over the medicare income level. The amount converted would increase your O-MAGI.
This is approach I would take.
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Old 06-20-2013, 04:44 AM   #12
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Sorry, I meant medicaid level, not medicare level.
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Old 06-20-2013, 06:58 AM   #13
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pb4uski - I am working on that Medicare, one year at a time! Wonder if that milestone will feel as good as 18 or 21?
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Old 06-20-2013, 07:07 AM   #14
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pb4uski - I am working on that Medicare, one year at a time! Wonder if that milestone will feel as good as 18 or 21?
No.
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Old 06-20-2013, 07:24 AM   #15
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LOL - but maybe it will be much more appreciated?
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