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Solo 401k to exclude income for ACA?
Old 04-18-2014, 12:58 PM   #1
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Solo 401k to exclude income for ACA?

I signed up for ACA for 2014 and, based on projected 2014 income, am receiving federal subsidies. I want to make as sure as I can that my 2014 income does not push me over the subsidy cliff.

I will have modest income from part-time teaching and contract work. I am thinking of opening a solo 401k with Fidelity and donating most or all of this income, up to the federal limit of $23k. I have checked the MAGI definition for ACA, and it appears to exclude donations to qualified plans (line 28 of 1040).

Is this strategy sound? Am I missing something? Thanks.

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Old 04-18-2014, 01:10 PM   #2
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By exclude you mean that your income from PT teaching and consulting would be reduced by any contributions to qualified plans? If so, that is correct. The Obamacare MAGI starts with line 37, AGI and adjust it for tax-exempt interest, SS not subject to tax, and a couple other things I can't ever remember without looking them up.

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Old 04-18-2014, 01:15 PM   #3
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Yes, that is what I mean. Thanks.
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Old 04-18-2014, 01:18 PM   #4
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Yes, it will work. We will be using our solo k to dial I exactly the MAGI level we wish to hit.
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Old 04-18-2014, 02:43 PM   #5
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Don't forget to give yourself the profit sharing contribution as well. You should be able to get to around $30k before income hits your AGI.
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