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Still confused about IRA deductibility related to MAGI
Old 12-19-2014, 11:01 AM   #1
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Still confused about IRA deductibility related to MAGI

I'm still trying to get my head around whether I can deduct traditional IRA contributions as part of my modified adjusted gross income (the magic number for the Obamacare tax credit). I believe I've read threads here that says the deduction is applicable to MAGI, but this IRS document seems to say no. The document's publication date is 2004, though -- a search of the IRS site doesn't come up with anything newer. Was something in the MAGI definition changed since then?

I suppose a call to IRS would provide a definitive answer, but then again, maybe not.
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Old 12-19-2014, 11:21 AM   #2
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If you can make a deductible IRA contribution then it would reduce your AGI and your Obamacare MAGI. Obamacare MAGI starts with the AGI on your tax return and adds back tax-exempt interest and any non-taxable SS and a few other more obscure adjustments.

See http://laborcenter.berkeley.edu/pdf/..._summary13.pdf

Note on the top right box that deductible IRA contributions are a deduction.
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Old 12-19-2014, 11:37 AM   #3
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This was helpful to me -

http://www.consumerreports.org/healt...XTKEY=AYAHRE03

Line 32 is where you deduct your IRA contribution and that reduces your MAGI for Obamacare.
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Old 12-19-2014, 11:48 AM   #4
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What you need to know is that there are multiple definitions of MAGI for different purposes. Googling something like MAGI out of context is sure to produce confusing results. I'm sure if you googled " MAGI Obamacare" or somehing similar, you'd get a better answer.

https://www.google.com/?gws_rd=ssl#q...agi+definition

only the first few apply (though they may be others further down scattered among irrelevant ones)
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Old 12-19-2014, 12:56 PM   #5
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IRS Form 8962 "Premium Tax Credit (PTC)" is the form that you will be filing with your return to calculate the health insurance subsidy. The relevant MAGI is calculated on line 2.

I posted links to draft versions of this form and the instructions over at this thread (post 35).

-gauss
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Old 12-19-2014, 01:08 PM   #6
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I applied for ACA last year and showed I was going to take a large IRA distribution in January which gave me more than enough income for the year to stay out of Medicaid but that is where they put me. I canceled Medicaid and went back to my previous plan. Looking back perhaps if I had shown smaller IRA distributions every month maybe that would have kept me out of Medicaid.
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Old 12-19-2014, 01:14 PM   #7
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Quote:
Originally Posted by homestead View Post
I applied for ACA last year and showed I was going to take a large IRA distribution in January which gave me more than enough income for the year to stay out of Medicaid but that is where they put me. I canceled Medicaid and went back to my previous plan. Looking back perhaps if I had shown smaller IRA distributions every month maybe that would have kept me out of Medicaid.
If your previous plan was not purchased on the Marketplace than you would not be eligible for the premium credit regardless of your income -- this may be stating the obvious.

-gauss
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Old 12-19-2014, 01:37 PM   #8
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Originally Posted by gauss View Post
If your previous plan was not purchased on the Marketplace than you would not be eligible for the premium credit regardless of your income -- this may be stating the obvious.

-gauss
Don't understand, how could a plan previous to 2014 ACA be purchased on the Marketplace? Were some plans rolled into ACA as they were? Anyway, I did not receive any premium credit for 2014. I have HSA for 265/mo BCBS and am also keeping it in 2015 at $295/mo.(last year it will be available)
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Old 12-19-2014, 10:51 PM   #9
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Quote:
Originally Posted by gauss View Post
IRS Form 8962 "Premium Tax Credit (PTC)" is the form that you will be filing with your return to calculate the health insurance subsidy. The relevant MAGI is calculated on line 2.

I posted links to draft versions of this form and the instructions over at this thread (post 35).

-gauss
This is what I hoped you folks would steer me to. I much prefer a verification from the IRS than from a third-party organization I never heard of. A look at the form does that for me.

Thanks to all for walking me through this one more time. Now to load up those IRAs!
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Old 12-20-2014, 07:19 AM   #10
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Quote:
Originally Posted by homestead View Post
Don't understand, how could a plan previous to 2014 ACA be purchased on the Marketplace? Were some plans rolled into ACA as they were? Anyway, I did not receive any premium credit for 2014. I have HSA for 265/mo BCBS and am also keeping it in 2015 at $295/mo.(last year it will be available)
Poor wording probably on both of our parts. I was just trying to communicate that if whatever plan you finally purchased in 2014 was via the Exchange/Marketplace that a credit may be available, but if the plan was purchased outside the Marketplace then a credit would not be available. Sorry for the confusion.
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