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ACA payback and looking to next year
Old 11-13-2018, 10:33 PM   #1
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ACA payback and looking to next year

As some of you who followed my biotech thread know, I had a pretty good year. Endocyte was bought out for $24 and I was still holding 6000 shares with a cost basis of $1.20 (at one point I had 40,000 shares and joked on here that we should take the company private by doing a group purchase since they had $3 per share in cash).

Anyway, that and some other trading (thanks Merck!) means that I kind of missed my ACA magi target of $23,000 income....by about $230,000.

Yeah, when all the dust settles, it looks like our MAGI will be a tad over $250,000. I know I will have to pay back the entire subsidy but since I made a early estimated tax payment and last year's tax was only $1000 I should not owe any penalty. I thought I was done with writing the government $50,000 checks though....

So I get my renewal letter for ACA plans for 2019 and I am approved for a silver subsidized plan again. In all honesty is there a reason why I should predict income any higher than the $23,000 I did in 2018? We have about $400,000 still in the taxable and I use a estimated blended return of 6% (I keep a lot of the money in low risk CD/saving account and generate the main return on a small portion invested in biotech).

I mean I am still going to try and make as much as I can in 2019 too but you have to predict the future here and I see through a glass darkly.
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Old 11-14-2018, 12:43 AM   #2
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I don't think the Endocyte transaction will effect your 2018 tax return in that the deal is not scheduled to close until 2019.

Were you planning to purchase an ACA qualified plan on the Marketplace, either way, so that you will be eligible for subsidies when you file your 2019 tax return if for some reason the Endocyte does not close as planned in 2019?

I see this as the larger decision as opposed to whether you actually take the subsidies up-front vs taking them at the end of the year when you file your tax return.

-gauss
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Old 11-14-2018, 07:17 AM   #3
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I similarly missed the ACA subsidy in 2017, and had to repay the excess credit. I estimated my income at just under 400% FPL for both 2018 and 2019, and had no problem with either. For 2018, my 2017 return hadn't been filed yet so I didn't expect a problem, but didn't know how 2019 would go. I thought they might look at my last filed return (2017) and make me justify the lower estimate, but so far it has sailed through.
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Old 11-14-2018, 08:02 AM   #4
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I similarly missed the ACA subsidy in 2017, and had to repay the excess credit. I estimated my income at just under 400% FPL for both 2018 and 2019, and had no problem with either. For 2018, my 2017 return hadn't been filed yet so I didn't expect a problem, but didn't know how 2019 would go. I thought they might look at my last filed return (2017) and make me justify the lower estimate, but so far it has sailed through.
Thanks to a high cap gains distribution in late 2017, I had to repay the ACA subsidy I had been receiving throughout the year when I did my 2017 taxes in early 2018. Because my 2016 tax return was used for my 2018 ACA subsidy, going over the ACA subsidy cliff in 2017 didn't impact getting the subsidy up front.

But I will again go over the ACA subsidy cliff in 2018 due to an even larger cap gains distribution next month. Furthermore, for 2019 I will be denied an ACA subsidy because they are now using my over-the-cliff 2017 income (and I have no good reason to oppose it). If the cap gains distribution doesn't materialize at the end of 2019, I'll at least be able to recover it when I file my 2019 taxes in early 2020.
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Old 11-14-2018, 01:27 PM   #5
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Originally Posted by RunningBum View Post
I similarly missed the ACA subsidy in 2017, and had to repay the excess credit. I estimated my income at just under 400% FPL for both 2018 and 2019, and had no problem with either. For 2018, my 2017 return hadn't been filed yet so I didn't expect a problem, but didn't know how 2019 would go. I thought they might look at my last filed return (2017) and make me justify the lower estimate, but so far it has sailed through.
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But I will again go over the ACA subsidy cliff in 2018 due to an even larger cap gains distribution next month. Furthermore, for 2019 I will be denied an ACA subsidy because they are now using my over-the-cliff 2017 income (and I have no good reason to oppose it). If the cap gains distribution doesn't materialize at the end of 2019, I'll at least be able to recover it when I file my 2019 taxes in early 2020.
Emphasis added.

Where I live, the Department of Health and Welfare has no access to my tax returns. They base my tax subsidy on my estimated income for year N+1 which in turn is equal to my estimated income for year N. I provided them with the initial estimate for year 1.

Maybe things work differently where you two live. Why do you think that the ACA folks have seen or will see your 2017 tax returns?
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Old 11-14-2018, 01:44 PM   #6
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Emphasis added.

Where I live, the Department of Health and Welfare has no access to my tax returns. They base my tax subsidy on my estimated income for year N+1 which in turn is equal to my estimated income for year N. I provided them with the initial estimate for year 1.

Maybe things work differently where you two live. Why do you think that the ACA folks have seen or will see your 2017 tax returns?
I think I had to check a box on the application giving them the right to look at my tax returns. That's what I remember doing. Possibly I'm wrong or it may not apply to past records but that's not my impression.
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Old 11-14-2018, 02:01 PM   #7
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I think I had to check a box on the application giving them the right to look at my tax returns. That's what I remember doing. Possibly I'm wrong or it may not apply to past records but that's not my impression.
That squares with my understanding that the IRS won't share tax returns without the filer's permission. Thanks for the explanation.
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Old 11-14-2018, 02:05 PM   #8
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I think I tried not checking the box and I don't think it would allow me the subsidy in advance. I would've had to resolve it at the end of the year tax time.
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Old 11-18-2018, 11:25 AM   #9
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I don't think the Endocyte transaction will effect your 2018 tax return in that the deal is not scheduled to close until 2019.
Yeah, well I already sold out all my Endocyte for $23.67 so I am taking all the gain on that this year (mostly long term capital gains). This way I will start 2019 in poverty again. Getting my sign ready "Will trade biotech for food"

The way ACA works, you are encouraged to estimate your income low, but not too low. There is no real penalty for going over except that you have to pay it back. It looks like I am safe for this year as they will not be able to see that we made $250,000+ in the market since we won't file our taxes until April 2019. And in all honesty, who on here really expects me to make $250,000 off of a $50,000 investment every single year from now on?

I think it is more honest to predict a modest 7% to 10% return from the stock market.

The thing that really sold me on going with a cost sharing silver plan again for 2019 is that there are no HSA eligible plans for our county in 2019. If I were going to go with bronze and reconcile in 2020 on our tax return, I want to be able to contribute to a HSA at least.
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Old 11-19-2018, 09:52 AM   #10
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Since my income is in flux going forward, I plan to just not take the advance tax credits. Buy on the ACA, and if I can manage to get a credit at the end of the year great, if I can't then at least I don't owe more money at the end of the year.

I do know I also clicked on the "ok to use tax forms" but it was very unclear what they plan to use that for going forward and some wording made me think it would be tougher if I didn't agree, so clicked the box as I don't want to be bothered.

This year I made financial decisions based on the ACA credit which I wouldn't have normally made and realized I don't like a single tax credit having such a major influence on my decision making so going forward I'm eliminating that. Granted Im' single so the savings isn't anywhere near what families get.
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