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Old 09-28-2013, 05:52 PM   #41
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........ from what I have read it appears you can use those for dental and vision expenses? ...........
Yes, dental, vision and prescriptions in addition to medical care.
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Old 09-28-2013, 06:27 PM   #42
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What I am doing is calculating the sum of federal and state income taxes, Obamacare subsidies and state property tax relief where I do no LTCG (income is just dividends) and for $10k increments from there up to the top of the 15% tax bracket.

From above Medicaid to ~400% FPL the net effective tax rates range from 16% to 20%. If I add another $10k above 400% FPL it increases to 24% due to the loss of Obamacare, but if I go to the top pf the 15% bracket it grades back down to 21% as the impact of the Obamacare cliff is spread over more income.

Anyway, I'm not sure what I will do but the impact of the Obamacare subsidy cliff isn't as bad as it seemed to be earlier in the year based on more preliminary information so I may just forgo the subsidy and stick with the original plan and go to the top of the 15% tax bracket since the net cost at 400% FPL is ~19% and the cost at the top of the 15% bracket is 21%.

Note that the above is assuming 0% LTCG. If I run the numbers with Roth conversions rather than LTCG the difference between 400% FPL and the top of the 15% bracket is dramatically different - 23% at 400% FPL but 31% at the top of the 15% tax bracket so once I run out of LTCG and start Roth conversions I think I'll limit my income to 400% FPL.
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Old 09-28-2013, 07:28 PM   #43
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What kind of coverage do you get for $29.00 & is it widely accepted ?
We get coverage that is a much, much better than our current plan. And it's with Anthem Blue Cross, which is widely accepted. Here are the details:

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Old 09-28-2013, 07:52 PM   #44
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MAGI only counts income, so unrealized gains are not included. Dividends paid and cap gains realized, plus cap gains distributions all count towards MAGI.
Sorry, I used "unrealized" in the wrong context.

Yeah those dividends go towards buying more shares right now, but it does feel like since I haven't sold any shares, the balance is all "unrealized."
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Old 09-28-2013, 08:25 PM   #45
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From above Medicaid to ~400% FPL the net effective tax rates range from 16% to 20%. If I add another $10k above 400% FPL it increases to 24% due to the loss of Obamacare, but if I go to the top pf the 15% bracket it grades back down to 21% as the impact of the Obamacare cliff is spread over more income.
Can you explain this a bit more? How is the effective tax rate 16% at 133% of FPL? For a married couple making that little, the effective federal tax rate would be more like 5% or 10%.

A quickie calculation gives a tax due of $500 on $25000 (which would be above the Medicaid level). That is an effective tax rate of 2%

Edit. No, without any wage income, the effective tax rate would be more like 0% (for all income from interest, dividends, and LTCG)
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Old 09-28-2013, 08:43 PM   #46
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Can you explain this a bit more? How is the effective tax rate 16% at 133% of FPL? For a married couple making that little, the effective federal tax rate would be more like 5% or 10%.
Sure, it is a bit convoluted. When I say "tax' rate, I'm really referring to more than taxes - I'm referring to the net change in federal and state taxes, Obamacare health insurance subsidies and state property tax relief compared to the change in income. I'll use an example.

If I am just above Medicaid, my net taxes and subsidies will be ~12k benefit to me.

If I increase my income by $30k to just under 400% FPL, my net taxes and benefits will be a benefit of ~$6k. Since the additional $30k in income results in a $6k reduction in net benefits, the effective cost (or "tax" rate) of that $30k of income is ~20% ($6k reduction in benefits/$30k increase in income).

If I increase my income by another $40k from 400% FPL to the top of the 15% tax bracket, my net taxes and benefits will be a net cost of ~$4k or an increase of $10k from the net benefit of $6k at 400% FPL. Since the additional $40k in income results in a $10k unfavorable change in net taxes and subsidies, the effective "tax" rate of that $40k of income is ~25% ($10k/$40k)

I've rounded the numbers for the illustration. The actual % are 21% and 23%, respectively.
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Old 09-28-2013, 08:48 PM   #47
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But by the time you get to RMDs, you should be on Medicare anyway.
Note that part B and part D of medicare are also means tested. So if you get significant RMD's you will pay more. In one sense then we have a pay me now or pay me later situation. (For singles the limit is 85k now but I do expect it to fall to about 50k soon). For married double the amounts, from 85 to 107k its about $40/month more, then from 107 to 160 its 100, and from 161 to 214 its 170 and above 214k its 240 a month additional premium.
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Old 09-28-2013, 08:53 PM   #48
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Note that part B and part D of medicare are also means tested. So if you get significant RMD's you will pay more. In one sense then we have a pay me now or pay me later situation. (For singles the limit is 85k now but I do expect it to fall to about 50k soon). For married double the amounts, from 85 to 107k its about $40/month more, then from 107 to 160 its 100, and from 161 to 214 its 170 and above 214k its 240 a month additional premium.
Yes, but the question was about manipulating taxable income to qualify for the ACA subsidies.
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Old 09-28-2013, 09:16 PM   #49
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Sure, it is a bit convoluted. When I say "tax' rate, I'm really referring to more than taxes - I'm referring to the net change in federal and state taxes, Obamacare health insurance subsidies and state property tax relief compared to the change in income.
Ah ok. But I think your numbers must be very specific to your situation (with high state tax and real estate tax).

For a couple in a state with no state income tax, and who rent or live in a very low appraised house, the federal tax would be the only factor and it would be zero for 133% of FPL.

So this would be a baseline of 0% effective rate, and your effective rate at over 400% of FPL would be somewhere around 10% federal tax plus the loss of $12,000 of subsidy, or maybe 20%?

Going from 0% to 20% effective tax rate sounds bad.
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Old 09-28-2013, 09:48 PM   #50
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Yes, but the question was about manipulating taxable income to qualify for the ACA subsidies.
But the point I was making that if as a result you defer income till after your on medicare the system may get you then as well. The two items need to be combined in planning, trying to minimize the lifetime costs.
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Old 09-28-2013, 09:50 PM   #51
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But the point I was making that if as a result you defer income till after your on medicare the system may get you then as well. The two items need to be combined in planning, trying to minimize the lifetime costs.
Point taken. Thanks.
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Old 09-28-2013, 10:41 PM   #52
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Ah ok. But I think your numbers must be very specific to your situation (with high state tax and real estate tax).

For a couple in a state with no state income tax, and who rent or live in a very low appraised house, the federal tax would be the only factor and it would be zero for 133% of FPL.

So this would be a baseline of 0% effective rate, and your effective rate at over 400% of FPL would be somewhere around 10% federal tax plus the loss of $12,000 of subsidy, or maybe 20%?

Going from 0% to 20% effective tax rate sounds bad.
Yes, they are specific to my situation (LTCG but state taxes and state property tax relief).

However, my point was that a sensible way to evaluate the decision is to look at your net tax situation (federal and state income taxes and Obamacare subsidies and anything else) if you do no LTCG or Roth conversions and then what changes with each $10k of LTCG or Roth conversions that you do and look at the incremental cost in relation to the incremental income.

I suspect that many posters will have federal and state income taxes and Obamacare subsidy impacts since many states have income taxes. State property tax relief is probably more rare.
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Old 09-29-2013, 10:06 AM   #53
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We get coverage that is a much, much better than our current plan. And it's with Anthem Blue Cross, which is widely accepted. Here are the details:

That is great coverage ! I haven't been following Obamacare because I have Medicare & Federal Blue Cross & Blue Shield .
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Old 09-29-2013, 10:19 AM   #54
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We get coverage that is a much, much better than our current plan. And it's with Anthem Blue Cross, which is widely accepted. Here are the details:
T-Al, this plan seems half the price of the lowest plan what we'd be paying. Does the premium include the subsidy? Is it state specific? From what I see, it is not available in MA (?)
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Old 09-29-2013, 10:21 AM   #55
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But the point I was making that if as a result you defer income till after your on medicare the system may get you then as well. The two items need to be combined in planning, trying to minimize the lifetime costs.
But I'd guess if you can get a $10K subsidy for 8-10 or 15 years before hitting Medicare, you'd be way, way ahead. No?
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Old 09-29-2013, 12:35 PM   #56
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Ah ok. But I think your numbers must be very specific to your situation (with high state tax and real estate tax).
There are lots of variables and I think it will be specific numbers for each person's situation. Much or all of our income starting next year will be DW's self employment. So we have to deal with self employment tax, income tax at federal and state levels, and the implicit tax that comes with losing PPACA subsidies. I will be looking more closely once I get real numbers for exchange policies next month, but preliminary analysis suggests that the sweet spot for us (with 2 deductions kids) will be just a hair below 200% FPL. Since the bulk of our assets are in traditional IRAs and DW's business does not get us up to that level of income, I will fill in the rest with Roth conversions or any income that I generate.
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Old 09-29-2013, 01:09 PM   #57
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Despite the recent stock market gains, using FIFO as I have always done I have a potential capital loss if I sell shares of my stock mutual fund. Being that I am near the top of the income to receive ACA subsidies, I can reduce my MAGI a bit by selling some shares at a loss, carefully avoiding any wash sales, and stay in the subsidy-eligible income range.

I will be watching carefully the mid-December mutual fund distributions which sometimes have unforeseen "spikes" so if I have to offset some of those gains with cap losses I will do so.
Does our 2013 MAGI have any impact on our 2014 subsidy? Wondering if there will be a place on our 2013 tax form that asks, "What do you expect your 2014 MAGI to be?"

Or is the tax form just going to ask, "What was your 2013 MAGI?" and if your 2013 MAGI is too high for a subsidy to be given automatically, will you then have to file 2014 taxes to get your subsidy "refunded" if your 2013 MAGI is subsidy eligible?
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Old 09-29-2013, 01:16 PM   #58
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That is great coverage ! I haven't been following Obamacare because I have Medicare & Federal Blue Cross & Blue Shield .
Yeah those co payments are much lower than any ACA plans I've seen ...
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Old 09-29-2013, 01:29 PM   #59
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Yeah those co payments are much lower than any ACA plans I've seen ...
Below a certain income level, in addition to premium assistance, cost sharing is also applied by reducing copays and deductibles.
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Old 09-29-2013, 02:08 PM   #60
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Does our 2013 MAGI have any impact on our 2014 subsidy? Wondering if there will be a place on our 2013 tax form that asks, "What do you expect your 2014 MAGI to be?"

Or is the tax form just going to ask, "What was your 2013 MAGI?" and if your 2013 MAGI is too high for a subsidy to be given automatically, will you then have to file 2014 taxes to get your subsidy "refunded" if your 2013 MAGI is subsidy eligible?

From what I have read, the default will be based on your 2012 or 2013 MAGI. However, if your circumstances change (ERing, for instance), you can make a case to take the subsidies up front. It all comes out in the wash when you file taxes at year end in any case.
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