This question is for those who have some background with the ACA and with federal taxation (rare birds indeed!):
When I early-retired, my ownership in interest in my former law firm was purchased by that firm pursuant to an LLC agreement. The firm is paying the purchase price in 60 monthly installment payments using a 5-year promissory note. Those monthly payments include interest on the outstanding note balance. The firm is roughly 2/3 of the way through the payments on the note.
For reasons that remain a mystery to me, my able tax accountant instructed me to pay all of the interest on the 5-year note's principal when I filed my federal tax return shortly after I retired. I still annually pay the tax on the note interest I earn. But I owe no more tax on the note principal.
Yesterday, I learned that my privately purchased health insurance is going up about 12% in 2019.
So for the first time, I check out healthcare.gov last evening, now that 2019 open enrollment has begun. I used my 2017 federal tax return to provide a rough guide as to my 2019 MAGI, which is what Healthcare.gov apparently uses to determine eligibility. Specifically, I used my 2017 Adjusted Gross Income from Line 37. Using that number, I am eligible for a subsidy. Yay!
But then I remembered that I am getting substantial monthly note principal payments from my law firm. As stated above, I've paid the tax on the principal years ago. But are those monthly note principal payments that are made in 2019, included in 2019 MAGI for ACA purposes? Remember, all federal tax is already pre-paid on those 2019 principal payments to me.
Also, early on in the Healthcare.gov sign-in process, the site seemed to give me the option to get some sort of tax credit or refund in lieu of taking the subsidy right now. The option seemed to be recommended if my MAGI might vary substantially in 2019 from the MAGI number I provided. Is this a safe option for me to take if I am unsure of whether the note's monthly principal payments are included in MAGI?
For those who may want to say "LMGTFY," I did try to Google this, but no clear guidance. Except from Healthcare.gov, which stated, so helpfully, that MAGI is "not a line on your tax return."
My sincere thanks in advance for any guidance!
When I early-retired, my ownership in interest in my former law firm was purchased by that firm pursuant to an LLC agreement. The firm is paying the purchase price in 60 monthly installment payments using a 5-year promissory note. Those monthly payments include interest on the outstanding note balance. The firm is roughly 2/3 of the way through the payments on the note.
For reasons that remain a mystery to me, my able tax accountant instructed me to pay all of the interest on the 5-year note's principal when I filed my federal tax return shortly after I retired. I still annually pay the tax on the note interest I earn. But I owe no more tax on the note principal.
Yesterday, I learned that my privately purchased health insurance is going up about 12% in 2019.
So for the first time, I check out healthcare.gov last evening, now that 2019 open enrollment has begun. I used my 2017 federal tax return to provide a rough guide as to my 2019 MAGI, which is what Healthcare.gov apparently uses to determine eligibility. Specifically, I used my 2017 Adjusted Gross Income from Line 37. Using that number, I am eligible for a subsidy. Yay!
But then I remembered that I am getting substantial monthly note principal payments from my law firm. As stated above, I've paid the tax on the principal years ago. But are those monthly note principal payments that are made in 2019, included in 2019 MAGI for ACA purposes? Remember, all federal tax is already pre-paid on those 2019 principal payments to me.
Also, early on in the Healthcare.gov sign-in process, the site seemed to give me the option to get some sort of tax credit or refund in lieu of taking the subsidy right now. The option seemed to be recommended if my MAGI might vary substantially in 2019 from the MAGI number I provided. Is this a safe option for me to take if I am unsure of whether the note's monthly principal payments are included in MAGI?
For those who may want to say "LMGTFY," I did try to Google this, but no clear guidance. Except from Healthcare.gov, which stated, so helpfully, that MAGI is "not a line on your tax return."
My sincere thanks in advance for any guidance!
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