ACA Noob

[RetiredAt49]

I’m retiring in a couple of weeks and I’m not 100% sure I understand my state’s ACA website (I live in Idaho and they have their own marketplace).

I’m 49 and need to cover myself, spouse, and a kid.

I have $175k sitting in a savings account. My wife gets a business buyout that is not taxed. Our rental properties bring in approximately $45k in taxable income. I might do some consulting on the side (TBD)…

If I put estimated taxable income at $45k, pick a silver/gold ACA plan, but end up working/consulting I’d hate to pay back the subsidies.

Any guidance/experience from you all?

 

[chassis]

Enter a higher income estimate in the marketplace application that works out to the level of subsidy you are comfortable with, or no subsidy at all. The subsidy situation gets settled up at tax return time.

 

[RetiredAt49]

Enter a higher income estimate in the marketplace application that works out to the level of subsidy you are comfortable with, or no subsidy at all. The subsidy situation gets settled up at tax return time.

What happens if you enter a higher number (say $100,000 as income) but only make $50,000 in 2022? Do they credit you back for overpaying?

 

[captain3d]

Yes tax year accounts will settle it

 

[Dtail]

On the generic exchange, if one underestimates their income and one is on the silver plan, the cost sharing reductions are not settled up at tax time, unlike the tax subsidy aspect, so a free ride for that aspect.

 

[SevenUp]

If I put estimated taxable income at $45k, pick a silver/gold ACA plan, but end up working/consulting I’d hate to pay back the subsidies.

Any guidance/experience from you all?

If your estimated income was done fairly, but your actual income is higher, you won't have to pay back any more than you would have had to pay all year had you estimated the higher actual income.

And if your actual income is <400% of the Federal Poverty Line, there are repayment limits that could mean you pay back less than you would have had to pay all year had you made the higher estimate.

 

[SevenUp]

What happens if you enter a higher number (say $100,000 as income) but only make $50,000 in 2022? Do they credit you back for overpaying?

Lines 26 or 29 of https://www.irs.gov/pub/irs-dft/f8962--dft.pdf will be where it all gets settled.

 

[Aerides]

Basically this:

If you put in 45k and make $150k, you will be asked to pay more at tax time to claw back the extra subsidy.
If you put in $150k and make $45k, you will get a lesser subsidy now (or none, depending on the current cliff laws), and a bigger annual tax refund to pay you the difference

Many people always do it the 2nd way, because they have variable income. PS. your savings account has nothing to do with anything for the ACA. It's a tax program, so it's totally oriented to income.

 

[Big_Hitter]

I’m retiring in a couple of weeks and I’m not 100% sure I understand my state’s ACA website (I live in Idaho and they have their own marketplace).

I just went through this with Idaho DHW about 6 months ago. Since we file income taxes with the state, I noted in my income estimate how it foots with my prior tax return.

 

[Doingitwrong]

I’m retiring in a couple of weeks and I’m not 100% sure I understand my state’s ACA website (I live in Idaho and they have their own marketplace).

I’m 49 and need to cover myself, spouse, and a kid.

I have $175k sitting in a savings account. My wife gets a business buyout that is not taxed. Our rental properties bring in approximately $45k in taxable income. I might do some consulting on the side (TBD)…

If I put estimated taxable income at $45k, pick a silver/gold ACA plan, but end up working/consulting I’d hate to pay back the subsidies.

Any guidance/experience from you all?

With rentals and self-employment income you should be able to hit any reasonable estimate you make. But that'll require spending/saving more than you get in return currently.
You can do repairs/maintenance at the end of 2022 if you have taxable income on rentals.
You can set up a SEP IRA and reduce income.
I left fulltime w*rk at the end of 2017. Part time w*rk took off in 2018.
I have an LLC that files as a S-Corp. The LLC set up a 401k profit sharing plan for me. I run myself a monthly payroll. S-Corp reimbursement for our health insurance is included in my gross wages, which increases the employer 25% contribution to my 401K, but not included in FICA wages.
About 40-50% of my gross ends up in the 401k.
In 2020, I grossed $72,000 and $34,600 ended up in my 401k ($21800 employee and $12,800 employer contributions).
I don't withhold anything so the payroll taxes are low enough that I file those quarterly.

 

[RetiredAt49]

I have an LLC that files as a S-Corp. The LLC set up a 401k profit sharing plan for me. I run myself a monthly payroll. S-Corp reimbursement for our health insurance is included in my gross wages, which increases the employer 25% contribution to my 401K, but not included in FICA wages.

About 40-50% of my gross ends up in the 401k.

In 2020, I grossed $72,000 and $34,600 ended up in my 401k ($21800 employee and $12,800 employer contributions).

I don't withhold anything so the payroll taxes are low enough that I file those quarterly.

Who did you work with to setup/structure that S corp LLC? Also, do you mind sharing what your LLC does?

I’m a software engineer so considering doing some consulting.

 

[Doingitwrong]

Who did you work with to setup/structure that S corp LLC? Also, do you mind sharing what your LLC does?

I’m a software engineer so considering doing some consulting.

I’m in tax accounting and consulting.
Just one family office, a couple of oil companies, and occasional estate work nowadays.

A lawyer friend set my LLC up and I set up the 401k at a community bank’s trust department.

 

[Doingitwrong]

The LLC just need to make an S Corp election with the IRS.
You can do it in advance or with initial return.
It’s really the greatest option for adjusting your income, especially if you have after tax savings and/or other income to live off.