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Old 08-20-2013, 11:35 AM   #21
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Another link regarding MAGI for ACA purposes from Gov't's Congressional Research Service-

http://www.ncsl.org/documents/health...medicdprov.pdf

Starting on pg 6 of doc (pg 10 of pdf).
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Old 08-20-2013, 11:55 AM   #22
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Quote:
Originally Posted by GrayHare View Post
From 26 USC 36B:

The term "household income" means, with respect to any taxpayer, an amount equal to the sum of;
(i) the modified adjusted gross income of the taxpayer, plus
(ii) the aggregate modified adjusted gross incomes of all other individuals who;
(I) were taken into account in determining the taxpayer's family size under paragraph (1), and
(II) were required to file a return of tax imposed by section 1 for the taxable year.
(B) 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,
(ii) any amount of interest received or accrued by the taxpayer during the taxable year which is exempt from tax, and
(iii) an amount equal to the portion of the taxpayer's social security benefits (as defined in section 86 (d)) which is not included in gross
income under section 86 for the taxable year.
OK, so based on this if I claim head of household and claim a deduction for my GF then she can purchase on the exchange. I get that. Although based on my investment income she will receive no rebate.

But Section 1 referenced here states the following:

(1) Family size
The family size involved with respect to any taxpayer shall be equal to the number of individuals for whom the taxpayer is allowed a deduction under section 151 (relating to allowance of deduction for personal exemptions) for the taxable year.

So if I just file single and not claim head of household and therefore not claim her as an exemption and she files single, is below the FPL then she would go into the Medicaid pool?

Keep in mind that I am covered by a medical plan and she is not (when cobra expires) so we are purchasing on the exchange only for her. Seems to me that given I get no tax benefit by filing head of household and claiming her as an exemption (because of deduction phase outs) that we are kind of in a grey area. Either go into the Medicaid pool or pay full freight on the exchange with no federal rebate.
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Old 08-20-2013, 12:36 PM   #23
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Originally Posted by Tandemlovers View Post
The calculators ask for our income, which will most likely be $0.
Instead of thinking income in the generic sense, as income from a job, think modified adjusted gross income (MAGI) per the IRS definition on your tax forms for 2014.

Your retirement transfer to savings will likely count as income for your 2014 MAGI. It is really important to know what this number will be in advance, if it is too small, depending on your state, this might mean Medicaid and if it is one cent over 400% of poverty level for your family size, that extra penny can cost you thousands in health care subsidies.

There will be a trade off for many in 2014 between converting more retirement money to Roths to save on future taxes or increasing MAGI and possibly losing health care subsidies in the present.
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Old 08-20-2013, 02:14 PM   #24
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Originally Posted by RockyMtn View Post
But Section 1 referenced here states the following:

(1) Family size
The family size involved with respect to any taxpayer shall be equal to the number of individuals for whom the taxpayer is allowed a deduction under section 151 (relating to allowance of deduction for personal exemptions) for the taxable year.

So if I just file single and not claim head of household and therefore not claim her as an exemption and she files single, is below the FPL then she would go into the Medicaid pool?
I think that by that wording, (technically) it doesn't matter if you claim her as a dependent or not: If you could claim her as a dependent then she counts in your family size (and her income gets rolled up in your aggregate MAGI for purposes of computing the subsidies, etc.)

If she's on your return as a dependent, is there any impact on EITC for her or any other lost tax "opportunities"?


Quote:
Originally Posted by RockyMtn View Post
Either go into the Medicaid pool or pay full freight on the exchange with no federal rebate.
Yes, that sounds like the situation.

It would seem like Medicaid could save some money by allowing Medicaid-eligible people the option to take a voucher and use it as partial payment for a policy on the exchange. The voucher would be worth less than the actuarial value of Medicaid insurance (so most truly needy people would stay in "conventional" Medicaid, and those who take the voucher would actually save Medicaid some money), but it would let people who have some financial resources to get out of the Medicaid system and buy into better access to care--with their own money--on the exchanges. Few people would take the option, but for those who want it it would be a win-win.
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Old 08-20-2013, 02:49 PM   #25
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I think that by that wording, (technically) it doesn't matter if you claim her as a dependent or not: If you could claim her as a dependent then she counts in your family size (and her income gets rolled up in your aggregate MAGI for purposes of computing the subsidies, etc.)

If she's on your return as a dependent, is there any impact on EITC for her or any other lost tax "opportunities"?


Yes, that sounds like the situation.

It would seem like Medicaid could save some money by allowing Medicaid-eligible people the option to take a voucher and use it as partial payment for a policy on the exchange. The voucher would be worth less than the actuarial value of Medicaid insurance (so most truly needy people would stay in "conventional" Medicaid, and those who take the voucher would actually save Medicaid some money), but it would let people who have some financial resources to get out of the Medicaid system and buy into better access to care--with their own money--on the exchanges. Few people would take the option, but for those who want it it would be a win-win.
Yes, one would think the Feds would come up with something like that but then again they are the Feds. Filing head of household or single doesn't really materially change my return one way or another. Probably costs her a few bucks as she would get some sort of return given she is in the 0% bracket if she files single.

Seems as though the Feds should address this given the number of unmarried cohabitators these days be they opposite or same sex couples.
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Old 08-20-2013, 03:16 PM   #26
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Originally Posted by RockyMtn View Post
OK, so based on this if I claim head of household and claim a deduction for my GF then she can purchase on the exchange. I get that. Although based on my investment income she will receive no rebate.

But Section 1 referenced here states the following:

(1) Family size
The family size involved with respect to any taxpayer shall be equal to the number of individuals for whom the taxpayer is allowed a deduction under section 151 (relating to allowance of deduction for personal exemptions) for the taxable year.

So if I just file single and not claim head of household and therefore not claim her as an exemption and she files single, is below the FPL then she would go into the Medicaid pool?

Keep in mind that I am covered by a medical plan and she is not (when cobra expires) so we are purchasing on the exchange only for her. Seems to me that given I get no tax benefit by filing head of household and claiming her as an exemption (because of deduction phase outs) that we are kind of in a grey area. Either go into the Medicaid pool or pay full freight on the exchange with no federal rebate.
Not a tax or health care expert, but it seems to me that you cannot claim your GF as a dependent for IRS purposes and the PPACA has no provision for domestic partnership. Some employers policies do, if yours does not cover partners she falls into the Medicaid pool or pays full fare on the exchange.
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Old 08-20-2013, 03:23 PM   #27
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The IRS has different income calculations for different portions of the form. Might be worth talking to a CPA on this.

There is one set of income for contributing to a Roth
There is a different income for college tax credits
different income for earned income tax credits

some use income, some use adjusted gross income, some use modified adjusted gross income (MAGI) and there are different MAGIs for different tax calculations.
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Old 08-20-2013, 03:31 PM   #28
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Quote:
Originally Posted by Tandemlovers View Post
My question has to do with the various calculators I have found online. We are going to be
living off after tax cash reserves next year, and will avoid tapping our IRA for expenses during 2014.

The calculators ask for our income, which will most likely be $0.

The default message I receive with an input of $0 income is that we would be
eligible for our state's Medicaid plan. We would like to purchase health insurance under the new
plan, or, if necessary, use the Cobra option under his employer, though I suspect that will be
the more expensive option.


Martha
Your state may be different, but most states have an upper limit on the assets you may have in order to qualify for Medicaid. IRA accounts are normally counted, especially if you are under 70.5 and not taking RMDs.

Raising your income to the bottom threshold for acquiring the maximum subsidy looks like the best plan. If you are short on income, I would due the ROTH conversions to raise it to the desired limit.
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Old 08-20-2013, 03:40 PM   #29
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Quote:
Originally Posted by RockyMtn View Post
OK, so based on this if I claim head of household and claim a deduction for my GF then she can purchase on the exchange. I get that. Although based on my investment income she will receive no rebate.

But Section 1 referenced here states the following:

(1) Family size
The family size involved with respect to any taxpayer shall be equal to the number of individuals for whom the taxpayer is allowed a deduction under section 151 (relating to allowance of deduction for personal exemptions) for the taxable year.

So if I just file single and not claim head of household and therefore not claim her as an exemption and she files single, is below the FPL then she would go into the Medicaid pool?

Keep in mind that I am covered by a medical plan and she is not (when cobra expires) so we are purchasing on the exchange only for her. Seems to me that given I get no tax benefit by filing head of household and claiming her as an exemption (because of deduction phase outs) that we are kind of in a grey area. Either go into the Medicaid pool or pay full freight on the exchange with no federal rebate.
Unless you are under some legal obligation to support your GF, you might get a nasty notice from the IRS if you declare her as you dependent.
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Old 08-20-2013, 04:03 PM   #30
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Unless you are under some legal obligation to support your GF, you might get a nasty notice from the IRS if you declare her as you dependent.
I believe these are the rules for claiming someone as a dependent who is not a relative. My issue will be the $3800.00 which I guess rises minimally for 2013.

Live in your home all year; and
Have less than $3,800 gross income in 2012; and
Receive more than half their annual support from you; and
Are a U.S. citizen, U.S. resident alien, U.S. national, or a resident of Canada or Mexico for part of the year; and
Are not claimed as a dependent by another taxpayer.

Filing as head of household may be a bigger issue as I can't claim a GF as a "qualifying person" for HOH purposes even though I can claim her as a dependent and my other dependent (my son) didn't live with us for six months.
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Old 08-20-2013, 05:17 PM   #31
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RockyMtn

Thanks for the correction. Good info to know. Pick up a GF and gain 1 deduction. Oops, probably loose DW and that deduction (plus loose of 1/2 of all acquired assets). Okay, scratch the idea of picking up a GF.
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Old 08-20-2013, 05:37 PM   #32
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I'm in a similar situation to the OP (living off of taxable savings) except my taxable savings generates dividends that will put us over the medicaid limit (but under the subsidy limit).

My plan is to strategically harvest capital gains in my taxable accounts which will be 0% taxed for federal purposes but to stay below 400% FPL and qualify for the minimum subsidy. If I run out of gains to harvest, then I'll substitute tIRA to Roth conversions, but still stay under 400% FPL.

In my situation, the economic cost of exceeding 400% FPL but staying in the 15% tax bracket is extreme, about 36% of the incremental income will go to state taxes and making up for losing property tax and Obamacare subsidies.

If I were in the OP's situation, I would take Roth conversions to at least get away from Medicaid and onto the exchanges and I would consider doing additional Roth conversions to 400% FPL so as to keep the subsidies but reduce future RMDs.
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Old 08-20-2013, 07:10 PM   #33
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What about "hiring" your GF and paying her enough that her "income" is greater than the minimum needed to exceed the medicaid threshhold?
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Old 08-20-2013, 11:14 PM   #34
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Yes, for a year or so until this charade stops and the US does like Harry Reid says the Dems wanted to anyway- goes on single payer.

Meanwhile, all you people who are busy fiddling better hope you never reach Medicare age, because it was never lush and it is getting a lot less so to grab some funds for O-C.
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Old 08-21-2013, 07:41 AM   #35
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RE a Medicare voucher to purchase plans on the exchanges.
Quote:
Originally Posted by RockyMtn View Post
Yes, one would think the Feds would come up with something like that but then again they are the Feds. Filing head of household or single doesn't really materially change my return one way or another. Probably costs her a few bucks as she would get some sort of return given she is in the 0% bracket if she files single.

Seems as though the Feds should address this given the number of unmarried cohabitators these days be they opposite or same sex couples.
There should be dozens or hundreds of tweaks to improve the ACA. But, as long as a substantial portion of Congress is committed to halting implementation at all costs rather than improving the ACA nothing will happen. Unless, of course, one side achieves a filibuster proof majority in the Senate and majority control of the House (with internal consensus on how to proceed), and the Presidency. I'm not holding my breath. In the meantime we will struggle along with a crippled HC system - barely better than what preceded it, but better nonetheless.
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Old 08-21-2013, 07:49 AM   #36
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The posts on reducing MAGI are a different topic but still important so a new thread was created here Minimizing MAGI for PPACA

Please keep politics out of the thread. Improvements and modifications to the PPACA are an interesting topic, feel free to start a new thread. Let's please keep this thread focused on the original topic, meeting minimum MAGI requirements to qualify for exchange based PPACA insurance and not Medicaid.
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Old 08-21-2013, 12:02 PM   #37
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Thanks so much, everyone, for your replies. It looks like I have my work cut out for me.
If I understand the replies so far, there are three issues that are going to come into play for us next year:

1. tIRA withdrawals, since I now understand that my strategy to live use non-retirement account savings is not what we want to do.

2. the possibility of ROTH conversion from tIRA, which is something that is keeping me up at night worrying over.

3. limiting withdrawals to stay under 100% FPL (Wisconsin residents) in order to qualify for ACA subsidies.

I will start running simulations through Turbotax and look at the links that other posters recommended.

Thanks so much!

Martha
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Old 08-21-2013, 12:10 PM   #38
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Thanks so much, everyone, for your replies. It looks like I have my work cut out for me.
If I understand the replies so far, there are three issues that are going to come into play for us next year:

1. tIRA withdrawals, since I now understand that my strategy to live use non-retirement account savings is not what we want to do.

2. the possibility of ROTH conversion from tIRA, which is something that is keeping me up at night worrying over.

3. limiting withdrawals to stay under 100% FPL (Wisconsin residents) in order to qualify for ACA subsidies.

I will start running simulations through Turbotax and look at the links that other posters recommended.

Thanks so much!

Martha
Not sure if your point 3 is a typo, but you want to stay just above 100% of the FPL so you can qualify for ACA subsidies.
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Old 08-21-2013, 12:41 PM   #39
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Not sure if your point 3 is a typo, but you want to stay just above 100% of the FPL so you can qualify for ACA subsidies.

That one left me scratching my head also.
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Old 08-21-2013, 12:48 PM   #40
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With all the gaming of the system people are doing to gain a subsidy makes me thankful I do not need to use Obamacare.
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