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Old 10-31-2013, 12:23 PM   #41
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What this subsidy does is effectively increase the marginal tax rate by 6.3% to 9.5% for everyone between 200% FPL and 400% FPL. To reduce the sting it gives you a cash grant somewhat inversely proportional to the income.

Above 400% FPL it is untouched. Under 200% it's complicated.
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Old 10-31-2013, 02:11 PM   #42
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Originally Posted by ziggy29 View Post
Yes. HSA contributions and 401k/403b defined contributions reduce your MAGI. Traditional IRA contributions, even if tax-deductible, do not.
My understanding is that contributions to Traditional IRA's reduce your MAGI
Am I getting this wrong?
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Old 10-31-2013, 02:24 PM   #43
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My understanding is that contributions to Traditional IRA's reduce your MAGI
Am I getting this wrong?
I'm pretty sure you are.

TIRA contributions reduce AGI but not MAGI. On the other hand, 401K and 403B contributions appear to reduce MAGI. Which means if we start dancing close to 300% of FPL next year, we're going to have to crank up DW's contribution to her 403B plan as it's really going to be the only way we can do it short of foregoing additional income.
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Old 10-31-2013, 02:31 PM   #44
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I don't think so Ziggy. O-MAGI = AGI + tax-exempt foreign earned income + tax-exempt SS + tax-exempt muni income so if a tIRA contribution is deductible it would reduce both AGI and in turn, O-MAGI.
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Old 10-31-2013, 02:34 PM   #45
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I have not had an HSA in the past. .......................)

On the downside, hassles, paperwork and fees. .................. That means my HSA balance is likely to remain small, which makes the fees less tolerable. It looks like even Health Savings Account - HSA Administrators would charge more than $45/year in fees.
Many (or at least some) credit unions do it for free......Alliant, for one.
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Old 10-31-2013, 02:59 PM   #46
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I don't think so Ziggy. O-MAGI = AGI + tax-exempt foreign earned income + tax-exempt SS + tax-exempt muni income so if a tIRA contribution is deductible it would reduce both AGI and in turn, O-MAGI.

That is how I have always understood it that Traditional IRA will reduce the MAGI. Here is a graph that I think explains the deduction:
ttp://laborcenter.berkeley.edu/healthcare/MAGI_summary13.pdf
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Old 10-31-2013, 03:37 PM   #47
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I don't think so Ziggy. O-MAGI = AGI + tax-exempt foreign earned income + tax-exempt SS + tax-exempt muni income so if a tIRA contribution is deductible it would reduce both AGI and in turn, O-MAGI.

I don't know what the O stands for in your formula.

But Ziggy is right. I had known this -- then forgot about it -- remembered it -- then forgot about it again -- now I will etch this in my memory.

Deductible IRA's are ADDED BACK to AGI to get MAGI for ACA purposes.

=================================

Edited as below:

I think it is time to forget about it again. Deductible IRA does seem to reduce MAGI.

There is so much misinformation about this I don't know what to believe at this time. I'd seen the link provided by Cedar and it is a reputable one. But there are countless others which are clearly telling otherwise. So I am filing this under 99% confirmed.
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Old 10-31-2013, 03:40 PM   #48
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Note to Ziggy.. shouldn't you be maxing out on 401(k) any way!
I got laid off in April. Our income is probably going to be around $40K in 2013. There's not a lot of room left for it, but the only plan like that we have now is my wife's 403B (she's currently putting 6% in, just to keep it a habit), and if we need to keep MAGI under 300% of FPL for ACA purposes, that's where we'll have to operate. But for a household of two, 300% of FPL is about $46K so we should be good.

Before I was laid off I was maxing out my 401K, two Roth IRAs and my HSA. Those days are gone (and I'm not sorry about it)....
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Old 10-31-2013, 03:45 PM   #49
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The IRS agrees with pb4uski.

Quote:
Modified adjusted gross income is the adjusted gross income on your federal income tax return plus any excluded foreign income, nontaxable Social Security benefits (including tier 1 railroad retirement benefits), and tax-exempt interest received or accrued during the taxable year. It does not include Supplemental Security Income (SSI).
From the IRS here Questions and Answers on the Premium Tax Credit
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Old 10-31-2013, 03:50 PM   #50
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What if you'd already deducted them as medical expenses on your tax return? That would be double-dipping.
Not if you live in Illinois and have the right political connections.
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Old 10-31-2013, 04:21 PM   #51
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The IRS agrees with pb4uski.

From the IRS here Questions and Answers on the Premium Tax Credit
Wow, I'm having a bad day on this if it's indeed the case. But it's also a case where I would be thrilled to be wrong.

I noticed I looked at something from the IRS dated 2004, and it related to passive losses, so maybe this isn't the case any more. But it said:

http://www.irs.gov/Businesses/Small-...me-Computation

Quote:
Exhibit 2.2: Modified Adjusted Gross Income Computation
Modified adjusted gross income (MAGI) for FORM 8582 line 7 is determined by computing:
AGI without:
Any passive loss or passive income, or
Any rental losses (whether or not allowed by IRC § 469(c)(7)), or
IRA, taxable social security or
One-half of self-employment tax (IRC § 469(i)(3)(E)) or ...

OR you can do the following alternative computation.
If there are capital gains/losses from passive activities, use method above.

Adjusted Gross Income Per Return _______________
+ Audit Adjustments Affecting AGI +/-_______________
Except passive activities (rentals and passive businesses)
- Taxable Social Security IRC § 86 - ________________
+ IRA Deductions IRC § 219 + ________________
+ Deduction for 1/2 Self Employment Tax + ________________
+ Passive Losses IRC § 469(i)(E)(iv) + ________________
Passive loss=Net rental loss and
Looks to me like they are telling you that IRA deductions need to be added back in. But maybe this is outdated (and I hope it is, since it would make managing MAGI fairly trivial for us). Or maybe it's telling me that this is a deduction that is added back in, and I need a remedial reading course.

Anyway, I really hope I'm wrong, as this means a quick IRA contribution in December 2014 could assure us of being on the right side of the cliff...
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Old 10-31-2013, 04:38 PM   #52
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Wow, I'm having a bad day on this if it's indeed the case. But it's also a case where I would be thrilled to be wrong.

I noticed I looked at something from the IRS dated 2004, and it related to passive losses, so maybe this isn't the case any more. But it said:
I have read repeatedly that MAGI is not the same as MAGI is not the same as MAGI.

You have to see how MAGI is defined as related to a specific provision. For example, I have seen references where they mention that MAGI calculation is different for Medicare and ACA.

This doesn't resolve the issue at hand, but worth noting.

I am at a point where I won't even rely on the IRS site at this time. Remember as recently as three weeks ago there was a push to delay and defund. The law technically goes into effect only Jan 1st. So IRS can easily do an oopsie.

If I can find it in the text of the law okay.
http://www.hhs.gov/healthcare/rights...protection.pdf
But I drew blank as it seems to refer to sections 911, 931, and 933 and I haven't found them yet.
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Old 10-31-2013, 04:43 PM   #53
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I have read repeatedly that MAGI is not the same as MAGI is not the same as MAGI.
If -- IF -- that's the case, then I'm heartened by MichaelB's link to the IRS determination with specific reference to ACA and the premium subsidy, since that seems to imply TIRA contributions *do* reduce MAGI, since that's $11K we could easily jettison. Would love to see something absolutely unambiguous, though. Because a lot of the stuff I've found, from what I think are usually reliable sources, suggest that IRA contributions have to be added back into MAGI after being deducted from AGI. I'm not sure I've ever wanted to be wrong this much. I assumed MAGI always meant the same thing -- maybe that's where I've been getting tripped up today.
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Old 10-31-2013, 05:07 PM   #54
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If -- IF -- that's the case, then I'm heartened by MichaelB's link to the IRS determination with specific reference to ACA and the premium subsidy, since that seems to imply TIRA contributions *do* reduce MAGI, since that's $11K we could easily jettison. Would love to see something absolutely unambiguous, though. Because a lot of the stuff I've found, from what I think are usually reliable sources, suggest that IRA contributions have to be added back into MAGI after being deducted from AGI. I'm not sure I've ever wanted to be wrong this much. I assumed MAGI always meant the same thing -- maybe that's where I've been getting tripped up today.
Absolutely unambiguous. That's a challenge. Here's the actual wording of the ACA (here)
Quote:
amended to read as follows:
‘‘(C) MODIFIED ADJUSTED GROSS INCOME.—The term
‘modified adjusted gross income’ means adjusted gross
income increased by—
‘‘(i) any amount excluded from gross income under
section 911, and
‘‘(ii) any amount of interest received or accrued
by the taxpayer during the taxable year which is
exempt from tax.’’
From the 1040 tax return, contributions to IRA's are subtracted from income to determine adjusted gross income.

Here's a nice chart from UC Berkeley http://laborcenter.berkeley.edu/heal..._summary13.pdf
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Old 10-31-2013, 06:54 PM   #55
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Yes , there are multiple MAGIs so you have to know which one you're fighting about. I often wish that IRS would number them to make ID more specific but I suppose it they did, folks would transpose digits, misquote them,etc so perhaps it is better left alone and ID's by context like ACA, etc.
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Old 10-31-2013, 08:47 PM   #56
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From the 1040 tax return, contributions to IRA's are subtracted from income to determine adjusted gross income.
See, this I knew. But most of what I saw about the definition of MAGI seemed to imply that TIRA contributions were added back in from the AGI. I never knew MAGI had multiple definitions. I'm very glad that this definition seems to exclude deductible TIRA contributions. That makes managing this a lot easier. Now I can cut a check in early 2015 instead of increasing my wife's 403B contributions and driving our poor church treasurer crazy. I'm sure she has better things to do than deal with our brinksmanship of the cliff.
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Old 10-31-2013, 09:23 PM   #57
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I don't know what the O stands for in your formula.

But Ziggy is right. I had known this -- then forgot about it -- remembered it -- then forgot about it again -- now I will etch this in my memory.

Deductible IRA's are ADDED BACK to AGI to get MAGI for ACA purposes.

=================================

Edited as below:

I think it is time to forget about it again. Deductible IRA does seem to reduce MAGI.

There is so much misinformation about this I don't know what to believe at this time. I'd seen the link provided by Cedar and it is a reputable one. But there are countless others which are clearly telling otherwise. So I am filing this under 99% confirmed.
O-MAGI = Obamacare MAGI (our own made up acronym for differentiating Obamacare MAGI from other MAGIs). As you are finding out there are a number of different MAGIs that are used for different purposes and making things even more screwed up, they are all similar but each have nuances of differences. The MAGI used for determining whether one can contribute to a Roth and the MAGI for Obamacare subsidies being examples of similar but different.
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Old 10-31-2013, 09:27 PM   #58
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O-MAGI = Obamacare MAGI. As you are finding out there are a number of different MAGIs that are used for different purposes and making things even more screwed up, they are all similar but each have nuances of differences. The MAGI used for determining whether on can contribute to a Roth and the MAGI for Obamacare subsidies being examples of similar but different.
This needs to be etched into the FAQ with a definitive source: not all MAGI are created equal. I never knew that until today. I don't feel as stupid now as I did a few hours ago when I was being proven wrong. I have a good reason now!
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Old 10-31-2013, 10:01 PM   #59
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http://laborcenter.berkeley.edu/heal..._summary13.pdf

Ziggy, I to am getting more confused by the minute. My link above showed that ACA calculations allowed Traditional IRA contributions to reduce your MAGI for ObamaCare. Now I find this link that says the opposite:

ObamaCare Calculator: Subsidies, Tax Credits, Cost Assistance

How to Calculate Your Modified Adjusted Gross Income (MAGI)

Once you have adjusted gross income, you "modify" it to calculate your MAGI.12 THE EMPLOYEE’S GUIDE TO HEALTH CARE REFORM’S TAX CREDITSS specifically, Modified Adjusted Gross Income (MAGI) is calculated by adding back certain items to your Adjusted Gross Income including:

• Deductions for IRA contributions.
• Deductions for student loan interest or tuition.
• Excluded foreign income.
• Interest from EE (employee) savings bonds used to pay higher education expenses.
• Employer-paid adoption expenses.
• For most people, MAGI is the same as AGI

This is very important for so many people that I think we should try and find out the correct answer. Thanks for everyone's impute.
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Old 10-31-2013, 10:25 PM   #60
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This needs to be etched into the FAQ with a definitive source: not all MAGI are created equal. I never knew that until today. I don't feel as stupid now as I did a few hours ago when I was being proven wrong. I have a good reason now!
You're the moderator. As Captain Picard would say - "Make it so."
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