Cancelling ACA in June, More MAGI income in August, Timing Matters?

[John Galt III]

I googled around for a while, and can't find the answer. I am 65 and have to go on Medicare July 1, 2019. Therefore I need to cancel my beloved ACA 6/31/2019. I also have a pension I need to start on 8/1/2019. The pension will be a lump sum of $17,000, which, if taken in taxable form, would bump my annual MAGI for 2019 up from $16,700 to $33,700, and I'll have to pay back some of my subsidies ( I am assuming). I'm getting subsidies based on estimated 2019 income of $16,700. The basic question here, I guess, is 'since my extra income arrived after I was off the ACA, can the extra income be ignored for purposes of ACA subsidies?' I was hoping to take the $17,000 pension as a Roth IRA, which unfortunately I believe would be counted as income for MAGI, typically. Of course I could roll the $17,000 into a 401K and have it be a non-taxable event, but that is my second choice. Another question : Could I take the Roth IRA in 2019 but have it apply to the 2020 tax year? Thanks.

 

[Rianne]

If you're getting ACA coverage based on $16,700 income for 2019, isn't that medicaid?

 

[John Galt III]

If you're getting ACA coverage based on $16,700 income for 2019, isn't that medicaid?

Nope, don't think so. I adjust my MAGI to be just over the federal poverty level, so I can avoid being on Medicaid, and qualify for ACA. Whatever it was for ACA, I estimated being just over that income. Might have been $16,800. Correction: I adjusted the MAGI to be 134% of the FPL.

 

[Rianne]

Then you're getting maximum subsidies. Depends on your state, how many deductions you can take. We have a HI broker who walks us through and we have to figure out CG, dividends. Around November we have to figure out of D/H does not get paid for some of the consulting work he did. So, he may work for free (for a month or two) in a given year. We come out ahead forgoing getting paid.

 

[sengsational]

I can't answer your question, but I can say what I'd do: pull out the tax software. Just "do your 2019 taxes" as if it were 9 months from now. Obviously using 2018 software, but it's "close enough".


My gut tells me that ACA is an annual kind of thing, so income is not segregated to before and after ACA was in effect. You might find the impact isn't that bad. And, as you say, rolling it into a tIRA flavor could be employed if it is bad.

 

[wmc1000]

Your magi will include your actual income for the calendar year so your pension money will count and reduce your actual subsidy qualifications. The cost sharing portions won't be affected. I went through this in 2018.

 

[Dtail]

Your magi will include your actual income for the calendar year so your pension money will count and reduce your actual subsidy qualifications. The cost sharing portions won't be affected. I went through this in 2018.

+1 Asked this conceptual question as a "what if" last year and the above was the response.

 

[joeea]

The basic question here, I guess, is 'since my extra income arrived after I was off the ACA, can the extra income be ignored for purposes of ACA subsidies?

You can ignore it or not. It will be trued up come income tax time next year.

 

[GTFan]

Your max payback at that subsidy level is capped at $300 ind./$600 fam., so it's not like it's a big deal. I would take whatever I could afford to pay tax on as income and not worry about the subsidy payback, in other words.

 

[MBSC]

The pension will be a lump sum of $17,000, which, if taken in taxable form, would bump my annual MAGI for 2019 up from $16,700 to $33,700...

Your max payback at that subsidy level is capped at $300 ind./$600 fam., so it's not like it's a big deal.

The subsidy repayment is calculated on the actual income. $33,700 would be 277.5% FPL for one person and 204.7% for two. In 2018, subsidy repayment for 200%-300% FPL was capped at $775 ind/$1550 family. The subsidy repayment limits are in Table 5 (page 16) of the Form 8962 Instructions.

Form 8962 Instructions: https://www.irs.gov/pub/irs-pdf/i8962.pdf

2018 FPL Charts for 2019 ACA: https://obamacarefacts.com/federal-poverty-level/

 

[gerntz]

I wonder where I'll be 6/31/2019.

 

[John Galt III]

The subsidy repayment is calculated on the actual income. $33,700 would be 277.5% FPL for one person and 204.7% for two. In 2018, subsidy repayment for 200%-300% FPL was capped at $775 ind/$1550 family. The subsidy repayment limits are in Table 5 (page 16) of the Form 8962 Instructions.

Form 8962 Instructions: https://www.irs.gov/pub/irs-pdf/i8962.pdf

2018 FPL Charts for 2019 ACA: https://obamacarefacts.com/federal-poverty-level/

Thanks, MBSC. I think I'll just redo my 2018 taxes using $33,700 as income and the tables you identified for me, and see what happens. Thanks to all!

 

[street]

Your magi will include your actual income for the calendar year so your pension money will count and reduce your actual subsidy qualifications. The cost sharing portions won't be affected. I went through this in 2018.

This ^

 

[zedd]

I wonder where I'll be 6/31/2019.

June what?

 

[GTFan]

The subsidy repayment is calculated on the actual income. $33,700 would be 277.5% FPL for one person and 204.7% for two. In 2018, subsidy repayment for 200%-300% FPL was capped at $775 ind/$1550 family. The subsidy repayment limits are in Table 5 (page 16) of the Form 8962 Instructions.

Form 8962 Instructions: https://www.irs.gov/pub/irs-pdf/i8962.pdf

2018 FPL Charts for 2019 ACA: https://obamacarefacts.com/federal-poverty-level/

Oops yeah I missed the pension payout in the OP, thanks for the correction.