Health insurance subsidy calculator

[Fermion]

Quote:

Originally Posted by pb4uski I hope it works the way you think it does. It would make my 2012 tax planning much easier and it will be fun to watch the feds going back and collecting overcredits that they have made to taxpayers.

They did this already when they advanced credits for the taxpayer relief stimulous thing a few years back. They are pretty good about getting their money back if you miscalculate.

[pb4uski]

Quote:

Originally Posted by Fermion I hope not! We will be retiring in 2015 and needing this insurance and have a big income in 2013. I was under the impression the subsidy was a refundable tax credit that they advance you, so it would be based on your income for the year in which the insurance is purchased. So the 2015 subsidy is based on your projected income for 2015. If you miss your projection and make more money in 2015, you have to repay a portion of the advanced tax credit when you file your 2015 tax return.

Quote:

Originally Posted by pb4uski I hope it works the way you think it does. It would make my 2012 tax planning much easier and it will be fun to watch the feds going back and collecting overcredits that they have made to taxpayers.

I found the IRS reg and it does seem to work the way you though it did. We'll get a credit to our premiums paid directly to the insurer in 2014 and when we do our 2014 tax returns will need to reconcile the credits we were due based on our 2014 tax return income with the credits we received and then either pay back or receive the difference.

Quote:

§1.36B-4 Reconciling the premium tax credit with advance credit payments. (a) Reconciliation--(1) Coordination of premium tax credit with advance credit payments--(i) In general. A taxpayer must reconcile the amount of credit allowed under section 36B with advance credit payments on the taxpayer’s income tax return for a taxable year. A taxpayer whose premium tax credit for the taxable year exceeds the taxpayer’s advance credit payments may receive the excess as an income tax refund. A taxpayer whose advance credit payments for the taxable year exceed the taxpayer’s premium tax credit owes the excess as an additional income tax liability.

Also see: https://s3.amazonaws.com/public-insp...2012-12421.pdf

[marko]

So what I'm reading here is that we don't have to juggle our 2013 income and instead will get a refund of some sort (if appropriate) in 2015 on our 2014 income. Is that the idea?

If so, wouldn't we be forced to increase our 2014 income to make the HC premiums? That could force some over the line. Or would the premiums be a deductible?

Or is it too soon to know any of this?

[Fermion]

Quote:

Originally Posted by marko So what I'm reading here is that we don't have to juggle our 2013 income and instead will get a refund of some sort (if appropriate) in 2015 on our 2014 income. Is that the idea? If so, wouldn't we be forced to increase our 2014 income to make the HC premiums? That could force some over the line. Or would the premiums be a deductible? Or is it too soon to know any of this?

No, they will advance you the money in 2014 to pay the HC premium and you won't have to pay back the advance if you are able to claim the subsidy as a tax credit on your 2014 return you file in 2015. Like i said, it kind of works like the stimulous checks they mailed out a few years ago, except I am not sure in what form they will advance the money or if they will just pay the insurer for you.

[pb4uski]

The advances go directly to the insurer from what I have read.

So I think for me, I can do Roth conversions up to the top of the 15% bracket in 2012 and 2013 as the subsidies will not be a constraint for those years, but in 2014 the 399% FPL will be the constraint.

[Fermion]

Quote:

Originally Posted by pb4uski The advances go directly to the insurer from what I have read. So I think for me, I can do Roth conversions up to the top of the 15% bracket in 2012 and 2013 as the subsidies will not be a constraint for those years, but in 2014 the 399% FPL will be the constraint.

I want to stay far below the 399% FPL Just in the premium difference, there is an extra $5000 to be had if you are at 150% of FPL than 300% (for a married couple, no kids).

This would be like losing $5000 on $30000 of additional income, which is like an additional 16% tax. it actually looks worse than that on some of the calculators if you factor in the deductable portion increasing with income. Not to mention you are also paying more federal income tax on a 60,000 income than a 30,000 income.

I wonder if it works out to something like you take home $48,000 with a $60,000 income after taxes and the lower HC subsidy and you take home $28,000 of the $30,000 income. Would be a big advantage to having your house paid off such that you can easily live on the lower income...

[foxfirev5]

Another reason why I shouldn't have contributed excessively to my 401k over the years. Will Roth distributions count as MAGI for the subsidy?

[ShokWaveRider]

And Why do some folks want to repeal this?

[marko]

So they advance about $10K (per family of 2) to the insurer. If you're tax return is below the wire, you're clean. If you end up above the wire by even $1, you owe them $10K in additional "tax".

It sounds good, but I can see a lot of problems in them getting people in the $60K ($60,001K) income range to cough up $10K at year's end.

This sounds like a great opportunity for some smaht people to come up with a "calculator".

[Aiming_4_55]

Interesting... just used the UC calculator for the first time to amuse myself. If this is accurate and holds true, many more options will apply to my semi-ER plans.

Any restrictions for a mid-40s individual from going to part time work and qualifying?

[rbmrtn]

This articles says that is the "most recent tax filing"

"The amount of the MAGI used to determined the amounts of these advance payments will be based on the individual’s income from the most recent taxable year for which it is determined that information is available. (For example, for a person enrolling on January
1, 2014, a determination of the amount of subsidy would be based on his or her income from 2012, as reflected in his or her tax return filed in the spring of 2013.)"

http://healthconsumer.org/New_Health...ef_4_Final.pdf

[Fermion]

Quote:

Originally Posted by rbmrtn This articles says that is the "most recent tax filing" "The amount of the MAGI used to determined the amounts of these advance payments will be based on the individual’s income from the most recent taxable year for which it is determined that information is available. (For example, for a person enrolling on January 1, 2014, a determination of the amount of subsidy would be based on his or her income from 2012, as reflected in his or her tax return filed in the spring of 2013.)" http://healthconsumer.org/New_Health...ef_4_Final.pdf

If that is the case, then it just means you may have to come up with the full premium for the first year of your ER but would get it back at tax time. With fixed rate investments paying so little, this isn't a huge deal...1% of $10,000 is only $100.

[marko]

Underlines are mine.

Per http://healthconsumer.org/New_Health...ef_4_Final.pdf

"For purpose of the subsidies, “adjusted gross income” is “modified” by the inclusion of foreign
income and housing costs paid for individuals living outside the United States (which is excluded from gross
income for tax purposes), and the inclusion of any amount of interest received or accrued by the taxpayer
during the taxable year which is exempt from tax. In other words, some income which may be excludable
for federal tax purposes will nonetheless be included in household income for the purpose of calculating the

subsidies available"

Might that include what is inside one's IRA? Note 16 states that SS is not included in MAGI.

My take: even though we're 15 months away, nobody really knows the deep details.

[Fermion]

Quote:

Originally Posted by marko Might that include what is inside one's IRA?

If they included what was in your IRA, then they would have to include the future value of a person getting a pension to be fair. I really doubt they would do either.

I do think they will include earnings from municipal bonds in the health care subsidy credit calculation.

[marko]

Quote:

Originally Posted by Fermion If they included what was in your IRA, then they would have to include the future value of a person getting a pension to be fair. I really doubt they would do either.

I hope so. They specifically mention "interest" income that may otherwise be exempt from Federal Tax.

Again, with only 15 months before implementation, I'm hoping for a lot more clarity soon.

[rbmrtn]

Does anyone know if you are in an existing state high risk pool, would you have the option of moving to an ACA exchange plan. I have not found anything on that.

I know that if you, for example qualify for medicaid , then you have to take it versus buying an exchange plan. Hence a lot of maneuvering to keep income high enough to avoid medicaid but low enough to qualify for subsidies.

But some states already have high risk pools in place. If your in one of those does it exclude you from buying an ACA plan.

[pb4uski]

Quote:

Originally Posted by rbmrtn This articles says that is the "most recent tax filing" "The amount of the MAGI used to determined the amounts of these advance payments will be based on the individual’s income from the most recent taxable year for which it is determined that information is available. (For example, for a person enrolling on January 1, 2014, a determination of the amount of subsidy would be based on his or her income from 2012, as reflected in his or her tax return filed in the spring of 2013.)" http://healthconsumer.org/New_Health...ef_4_Final.pdf

Thanks for that document. But then it later explains the reconciliation process:

Quote:

As explained above, the subsidies will be paid in advance based on tax returns from prior years. However, the ultimate amount of tax credit to which the individual is entitled will be based on actual MAGI for the year to which the tax credit applies. Thus, there will be a “reconciliation” process between the tax credit amount for which a taxpayer is determined eligible and the advance tax credit payments. If an individual or family receives higher advance payments than the total amount of tax credit for which they are later determined eligible, they may face an increase in taxes due for the taxable year upon filing of their tax return.

So it sounds like the credits would be provisionally based on 2012 tax return MAGI and then trued up on the 2014 tax return based on actual 2014 income.

So if I use the top of the 15% bracket as a constraint on Roth contributions in 2012 and 2013 and some percentage less than 400% of FPL as a constraint in 2014 and 2015, I would get less credit that I deserve during 2014 and 2015 and would be a tax refund for the shortage on mu 2014 and 2015 tax returns filed in 2015 and 2016.

[pb4uski]

Quote:

Originally Posted by Fermion If they included what was in your IRA, then they would have to include the future value of a person getting a pension to be fair. I really doubt they would do either. I do think they will include earnings from municipal bonds in the health care subsidy credit calculation.

+1 I think the MAGI will include any non-taxable income like municipal bonds, nontaxable SS, etc but it is very unlikely that it would include inside buildup on an IRA or 401k or pension or cash value life insurance or deferred annuity.

[pb4uski]

Quote:

Originally Posted by ShokWaveRider And Why do some folks want to repeal this?

because it is highly questionable whether as a nation we can afford it.

[Cut-Throat]

Quote:

Originally Posted by pb4uski because it is highly questionable whether as a nation we can afford it.

It's mostly about Power politics rather than about affordability. The CBO has said that this will actually save money. Currently about 46 Million Americans use the Emergency Room as their 'Insurance' and pay zero Premiums. The ACA will collect some premiums from these folks. America cannot afford the current situation, the ACA was a solution to this.

Medicare has problems with the escalation of Medical Costs, no doubt about it....And something has to be done for cost control soon. (Americans Pay twice as much as other countries for healthcare)..... Americans should be more afraid of Cancer than a terrorist, but we seem to have never ending resources to protect against terrorists.

If the Private sector could handle this issue on its own, this would not be an issue. It has been brewing since the 1980s when costs got out of hand.