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Want to change funds in taxable with obamacare can equal a big bill
Old 09-18-2017, 10:46 AM   #1
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Want to change funds in taxable with obamacare can equal a big bill

I have a 47k gain in a fund I want to sell. It looks like it will take me about 3 years if I want to stay in the 15% bracket. My obamacare will go high while I am selling for 2 or 3 years. Any of you faced this yet? In the long run I will save money but it will be painful for 2 or 3 years.
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Old 09-18-2017, 11:05 AM   #2
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It's a facet of the tax code that is currently notable, yes.

Capital gains add to AGI and reduce Obamacare subsidies even though they may be taxed at 0% if you are in the 15% (or lower) bracket.

The conventional wisdom I have seen on the subject is to simply evaluate the trade-off from all perspectives and decide if realizing those gains is worth losing the subsidies. Some people (including me) place some weight on getting the ACA subsidies now while one still can get them as there is some thought that the landscape may change in the future.
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Old 09-18-2017, 11:29 AM   #3
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I have not really come across exactly what you face. I have a big pile of carry over losses that would cover your CG a couple times over.

I do look at Roth conversions up to the top of the 15% vs HC subsidy. I've sided on conversion based comparing the total tax to do the conversion to that of those same $ at the top marginal rate I estimate I'll be in. All these plans my turn bogus if tax laws change.

I am looking at sale of appreciated stock with higher embedded gains. But as noted, I've got carry over losses to cover this one + some.

This is really just every day investing decisions.
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Old 09-18-2017, 11:33 AM   #4
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It's a facet of the tax code that is currently notable, yes.

Capital gains add to AGI and reduce Obamacare subsidies even though they may be taxed at 0% if you are in the 15% (or lower) bracket.

The conventional wisdom I have seen on the subject is to simply evaluate the trade-off from all perspectives and decide if realizing those gains is worth losing the subsidies. Some people (including me) place some weight on getting the ACA subsidies now while one still can get them as there is some thought that the landscape may change in the future.

+1 on this... plus I am trying to keep below the level so I can also get help on copays etc... so it is not just the tax credits I would lose...

I have much more untaxed gain than you... eventually I will have to pay the piper...
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Old 09-18-2017, 11:58 AM   #5
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While not exactly the same issue, I'm sitting on tons of gains in a taxable account, and would really like to rebalance in a big way since most experts I respect are forecasting fairly subdued stock returns for the next decade. But once I factor in the taxes from selling, the decision keeps leading me to paralysis. (The numbers are sufficiently large that I can't simply rebalance by adding income to other buckets.) Good luck with whatever you decide. The only way to know the "right" answer will be to wait many years, and do a look-back calculation, at which point it'll be simply an academic exercise and likely won't make any difference to your real life.
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Old 09-19-2017, 07:36 AM   #6
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Same situation as RenoJay earlier this year. I opted to sell to rebalance which will bump me up one bracket on ACA. Was a control-what-you-can decision. My carrier is leaving ACA come 2018. No idea what the cost will be, other than not lower.
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Old 09-19-2017, 07:54 AM   #7
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I thought about taking all my gains in one year. But it seems to be about $500 cheaper for me to spread it out over two or three. But it sure slows things down. The only good news is when I am done my income will be super low. In the 15% tax bracket obamacare is a big deal.
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Old 09-19-2017, 03:31 PM   #8
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I thought about taking all my gains in one year. But it seems to be about $500 cheaper for me to spread it out over two or three. But it sure slows things down. The only good news is when I am done my income will be super low. In the 15% tax bracket obamacare is a big deal.
Just a quick pedantic note. Maybe it will be helpful.

Obamacare benefits are mostly defined in terms of the percentage of FPL. The 15% bracket depends on income and filing status. The two generally overlap but they are different things.
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Old 09-19-2017, 04:07 PM   #9
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Well I faced that last year. In the end we had enough carried forward losses to ease the gain and pain.
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Old 09-19-2017, 05:39 PM   #10
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Had a six bagger on Reynolds. Sale closed over the summer so my estimated tax due 9-15 was a painful reminder of reality.
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Old 09-19-2017, 05:51 PM   #11
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I thought about taking all my gains in one year. But it seems to be about $500 cheaper for me to spread it out over two or three. But it sure slows things down. The only good news is when I am done my income will be super low. In the 15% tax bracket obamacare is a big deal.


Is your situation one where the gains are "locked in", but you have discretion as to when to recognize them for tax purposes? If not, I would be concerned about the survivability of those gains if they are taken over 2-3 years.

For less than the cost of replacing an iPhone, I would take them now for the certainty.
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Old 09-19-2017, 08:01 PM   #12
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Is your situation one where the gains are "locked in", but you have discretion as to when to recognize them for tax purposes? If not, I would be concerned about the survivability of those gains if they are taken over 2-3 years.

For less than the cost of replacing an iPhone, I would take them now for the certainty.
They are not locked in. The problem is they are still short term gains at this point. I think I will have to wait at least until they are long term gains.
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Old 09-22-2017, 02:26 PM   #13
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I took the hit yesterday and did some big time rebalancing which included a large equity sale in my taxable account where the majority of it was cap gains. I'm in the camp that this market is overvalued and at some point I'll have a better entry point, even on a tax-adjusted basis. Still hurts though.
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Old 09-22-2017, 02:30 PM   #14
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.... I'm in the camp that this market is overvalued and at some point I'll have a better entry point, even on a tax-adjusted basis. Still hurts though.
I'll bet you would have said the same thing 6 months ago.... many people did anyway and the S&P is up 6-7% since then.
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