Can You Help Me Maximize my Health Insurance Tax Credit?

[nico08]

Hi.

I was terminated from my employment of about eight years in August 2014 and two weeks later I was diagnosed with colon cancer. I immediately enrolled in COBRA insurance because I knew how costly my medical bills would be in the near future. I was close to FIRE when this all happened, I maybe needed about two more years of full time corporate hell/work to have the cushion I woud ideally want.

So I received unemployment compensation for part of 2014 and part 0f 2015. I have been focusing on regaining my health and reducing my stress during the last year and I have not worked.

COBRA eligibility will end on January 31, 2016. I am trying to see if I can change my investments around so that I could maximize the tax credit possible with Obamacare. I believe income of 29,000 or below (for a single person) gives you the highest tax credit.

Here is an example of what my income may be for 2015-
unemployment compensation 7632
ordinary dividends 13523
qualified dividends 7582
interest 3
capital gains 7403
total 36143

This is what my income for 2016 might look like if things remain consistent and it looks like I would be just at the cusp of the income level for maximum eligibility of the tax credit.
ordinary dividends 13523
qualified dividends 7582
interest 3
capital gains 7403
total 28511

Is there anything I can do to increase the likelihood that I will be eligible for the maximum amount of the tax credit? Thank you.

 

[pb4uski]

Hey nico... good to see you posting again. I hope that things are working out for you.

If you buy a HSA qualifying plan you can establish a HSA, contribute up to $4,350 (2015 limit) to it, use it for your medical costs or let it sit and grow and the $4,350 contribution will reduce your income.

You might be able to shift some of your taxable account equities to growth stock funds that pay little or no dividends with a corresponding shift to value stock funds in your tax-deferred accounts. Total return would be similar but what is taxable would change.

Similarly, you might look at doing some gains trading this year to increase your basis so your capital gains in future years will be lower.

Just FYI... tax exempt interest doesn't do you any good as that is one of the add-backs.

http://laborcenter.berkeley.edu/pdf/2013/MAGI_summary13.pdf

 

[nico08]

Hi pb4uski,

It's good to be back. I think I have reached a point where I am thinking about the possibility of a future. And if I am going to have a future, then I should make a plan for it. Active treatment is over for now, and I am kind of in a monitoring stage, to see if anything comes back, and if it does to try and catch it early.

Thank you for the timely and informative response. I do my own taxes, so it is not like I can just pick up the phone and ask him what he thinks I should do. I am so glad that health insurers can no longer cherry pick their insureds. If that were still the case, I would really be up a creek without a paddle.

I will probably be asking more questions here as I begin to re-evaluate my financial future.

 

[aaronc879]

If you buy a HSA qualifying plan you can establish a HSA, contribute up to $4,350 (2015 limit) to it, use it for your medical costs or let it sit and grow and the $4,350 contribution will reduce your income.

Keep in mind you can only use a HSA if you have a high deductible plan with "high" defined as $1300 or more for a single person or $2600 or more for a family plan.

I qualify for a plan with a lower deducible so I don't think getting a HSA is beneficial to me but that doesn't mean it's not beneficial to the OP. He'll have to do a few hours of research after Nov 1st when the new plans are available.

 

[SecondCor521]

Since the tax credit is based on your MAGI, it seems like other things that reduce AGI would work just as well. Two things that come to mind would be realizing capital losses in taxable accounts, or contributing to a traditional IRA and taking a tax deduction for it. These options may or may not apply to the OP, but there are other things on page 1 of the 1040 that can be used (rental "losses" via depreciation, etc.).

Monitoring the situation during the year and making needed adjustments before the close of 2016 is a general strategy that will also help.

 

[rbmrtn]

The subsidy is income based so to maximize it you want to be just above the threshold for medicaid.

You can plug your numbers into a subsidy calculator for an estimate, Health Insurance Marketplace Calculator | The Henry J. Kaiser Family Foundation

 

[Ian S]

If you can reduce your income even more, you could become eligible for cost sharing reduction subsidies.

 

[Bamaman]

If I was battling cancer, first thing I would have done is apply for Social Security Disability. You'd have to be off 6 months to be eligible, however it's retroactive. After 2 years on disability, you'd be eligible for Medicare--and could buy a Supplement.

Are you now able to work?

 

[papadad111]

The subsidy is income based so to maximize it you want to be just above the threshold for medicaid.

You can plug your numbers into a subsidy calculator for an estimate, Health Insurance Marketplace Calculator | The Henry J. Kaiser Family Foundation

+1.