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Old 08-21-2013, 12:19 PM   #21
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I thought that one of the advantages of being self-employed is that you can effectively well exceed the limit, by taking a pay cut and directing that money twoard increasing the company contribution to your solo 401k.
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Old 08-21-2013, 12:22 PM   #22
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Just a clarification though: Do HSA contributions reduce AGI, or reduce taxable earned income? In other words, do you have to have earned income for HSA contributions to reduce AGI?

My read of the article and other articles indicate that HSA contributions are directly tax-deductible - they don't require having earned income.
HSA contributions reduce AGI. Not a deduction, but an adjustment to income, similar to an IRA.
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Old 08-21-2013, 12:23 PM   #23
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But an IRA contribution requires earned income... so are you saying so does an HSA contribution?
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Old 08-21-2013, 12:30 PM   #24
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When we pull the plug, DW will remain self-employed. To the extent you are a self employed, a solo 401k is a very useful tool to fiddle with your MAGI because you can toss 100% of your income into it up to the contribution limit for the year (17.5k, I believe).
And, IIRC, both the employer and the employee sides of the contribution can actually be made after Dec 31. If I've got that right, it's uber valuable, since most ways to reduce OMAGI have to be implemented prior to the end of the calendar year (when you might not have a full picture of your income.)
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Old 08-21-2013, 12:32 PM   #25
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1. If you're looking to rebalance soon, take any capital gains this year and capital losses to tax lost harvest beginning of next year.

2. Tax loss harvest more frequently and deliberately.. to lock in losses ($3,000 for current year and then even more to carry over into future years). Where in the past you might have ignored a loss and waited for the position to recover, go ahead and TLH just to lock in the loss under ACA income rules - then wait 31 days and buy it back if you still want the position for the long term.

3. HSA.


The Hull Financial piece touting the Bronze plan was helpful but it's predicated on the out of pocket limits included in the original law. We have since learned that the out of pocket limits provision will be delayed until 2015. This may mean that one of the higher tiered plans might be a better option for 2014 at least.

Yet Another White House Obamacare Delay: Out-Of-Pocket Caps Waived Until 2015 - Forbes
I think the out of pocket roll back does not apply to plans sold on the exchange.
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Old 08-21-2013, 12:38 PM   #26
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Just a clarification though: Do HSA contributions reduce AGI, or reduce taxable earned income? In other words, do you have to have earned income for HSA contributions to reduce AGI?

My read of the article and other articles indicate that HSA contributions are directly tax-deductible - they don't require having earned income.
Hsa contributions do not require earned income.Or stated another way hsa contributions can be made with only passive income unlike an ira.


An hsa contribution does reduce magi used for aca calculation per link below


http://laborcenter.berkeley.edu/healthcare/MAGI_summary13.pdf
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Old 08-21-2013, 12:49 PM   #27
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Be sure, if you itemize, not to have a state income tax refund. It adds on to AGI. Just a small factor usually, but it cut our Roth IRA contributions one year.
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Old 08-21-2013, 12:50 PM   #28
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And, IIRC, both the employer and the employee sides of the contribution can actually be made after Dec 31. If I've got that right, it's uber valuable, since most ways to reduce OMAGI have to be implemented prior to the end of the calendar year (when you might not have a full picture of your income.)
Correct. My plan is to decide whether and how much we will put into DW's solo k as I file my taxes and know everything about what our MAGI and taxable income will be for the year.
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Old 08-21-2013, 12:51 PM   #29
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But an IRA contribution requires earned income... so are you saying so does an HSA contribution?
My understanding is there is no income requirement to make a HSA contribution. I looked at a number of sources and none mention any income requirement - but also, none state that you can contribute to a HSA if you have no income.

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Anyone, individuals, employees and employers, can open an HSA but you must have a corresponding high deductible health policy. More technically, an HSA can be established for any individual that meets all of the following:

is covered by a high deductible health plan
is not covered by another health plan
is not eligible to be claimed as a dependent on another personís tax return
is not entitled to Medicare benefits.
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Old 08-21-2013, 12:58 PM   #30
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Correct. My plan is to decide whether and how much we will put into DW's solo k as I file my taxes and know everything about what our MAGI and taxable income will be for the year.
Unfortunately, I don't have that latitude since I don't have a business.

What I plan to do is to have my 2014 tax return all but prepared just prior to the end of 2014, including any December 2014 capital gains distributions and then do some Dec 31 trades to get me to where I want to be. I'll probably even go $500-$1,000 below target in case some surprise pops up i won't go over 400% FPL.

I am researching but I think there will be a way to withdraw excess HSA contributions and interest thereon if I happen to go over which would make it unnecessary to undershoot, but i may undershoot anyway so if my tax return is audited some oddball thing doesn't pop up and put me over 400% FPL and require that I return the subsidy.
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Old 08-21-2013, 01:04 PM   #31
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My understanding is there is no income requirement to make a HSA contribution. I looked at a number of sources and none mention any income requirement - but also, none state that you can contribute to a HSA if you have no income.
The distinction I was worried about was specifically earned income... looking at HSA as a tax-advantaged path even when our income is strictly withdrawals from 401ks and IRAs.
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Old 08-21-2013, 01:51 PM   #32
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Shotgunner, thank you so much for that tidbit about Bronze plans with HSA. This is the most actionable post about the PPACA I've seen in quite some time. Kudos!

As an ER person, the hat trick will be to have the money to fund HSA without further adding to AGI to do so. Roth distribution?

Despite the variance in deductibles which permits the HSA, I believe all the metal plans have the same out of pocket maximum. Sounds like a win all around.

Thanks again!
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Old 08-21-2013, 02:10 PM   #33
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Be sure, if you itemize, not to have a state income tax refund. It adds on to AGI. Just a small factor usually, but it cut our Roth IRA contributions one year.
Similarly, after some calculations and recent changes to my personal situation which make itemized deduction "bunching" not worthwhile going forward, I won't be itemizing my deductions any more which will also have the added benefit of avoiding having a state property tax rebate (about $1,000) kept out of my (M)AGI. Given that I will probably be near the cutoff for ACA subsidies, this will surely help.
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Old 08-21-2013, 02:43 PM   #34
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Having had a HDHI HSA for a number of years now the article posted just reinforced what I already planned to do.

The article indicates
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Unfortunately, there are currently no calculators for estimating premiums aside from the Silver Plan calculator at the University of California Berkeley.
Actually, the Vermont Health Connect Subsidy Calculator shows average gross/net (after subsidy) costs by plan level (including some HSA eligible policies). Obviously, the results will be different for different jurisdictions. as a reminder, Vermont's premiums are not age rated so it is the same premium for all ages.
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Old 08-21-2013, 03:16 PM   #35
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401K contributions and for the self employed, increased business expenses may decrease AGI, like going to a conference on business travel, buying new PCs or hiring your kids. Buying the platimun coverage might be a good idea because the unsubsidized part of the premiums may be a deductible business expenses while the health care co-pays and deductibles usually are not tax deductible.

To avoid having to draw down retirement accounts and increase AGI, 401K, car and college loans might be useful.

Refinancing or downsizing and taking money out of the house under the capital gains exclusion may avoid increasing AGI instead of drawing down the retirement accounts.

Cutting expenses in general might mean less retirement account draw downs are needed.

These are some of the ideas we have thought of.
Not to be dense - but I thought one of the modifications of MAGI (vs AGI) is that you had to include 401k/IRA contributions in your MAGI (vs AGI)
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Old 08-21-2013, 03:19 PM   #36
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When we pull the plug, DW will remain self-employed. To the extent you are a self employed, a solo 401k is a very useful tool to fiddle with your MAGI because you can toss 100% of your income into it up to the contribution limit for the year (17.5k, I believe).
Can't you take that up to a cumulative $51k with a generous match?
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Old 08-21-2013, 03:22 PM   #37
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Not to be dense - but I thought one of the modifications of MAGI (vs AGI) is that you had to include 401k/IRA contributions in your MAGI (vs AGI)
"Contributions to Defined Contribution Plans" are "Fully Excluded from MAGI".

I believe the most common "add back" for MAGI is tax-exempt interest. I cannot think of any others, off the top of my head.
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Old 08-21-2013, 03:25 PM   #38
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Can't you take that up to a cumulative $51k with a generous match?
You can put in the first 17.5k and then 20% of earnings for a sole proprietor (25% if you are incorporated) up to the 51k limit. By the time you got anywhere near the business income needed to max out, PPACA subsidies would have been long gone from your reach unless you had 18 kids living in the house.
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Old 08-21-2013, 03:27 PM   #39
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Not to be dense - but I thought one of the modifications of MAGI (vs AGI) is that you had to include 401k/IRA contributions in your MAGI (vs AGI)
The problem is there are different MAGIs for different tax purposes. For the Roth IRA MAGI calculation, I think tIRA deductions get added back in to AGI, but not 401K deductions.

See this link -
Modified Adjusted Gross Income

I was assuming for ACA-MAGI, 401K deductions would still hold, and probably tIRA.
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Old 08-21-2013, 03:33 PM   #40
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The MAGI applicable to ACA is the same one applicable to Medicare - definitely different from MAGI as it applies to Roth.
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