Help with MAGI calculation for Obamacare Subsidy

[retire2020]

MFJ Family of 5 - 3 Kids(21 and in College, 13, 13)

1040 Line 8b Tax Exempt Interest $7277
1040 Line 22 Total Income $121,328
Dependent DD's W2 Income $291.20

Deducations as follow:
1040 Line 25 HSA Deduction $6750
1040 Line 27 Deductible part of Self Employment Tax $742
1040 Line 29 Self Employed Health Insurance Deduction $9755
1040 Line 34 Tuition and Fees $2500 I took some courses
1040 Line 37 AGI $101,581

1040 Line 48 Foreign Tax Credit $204
1040 Line 50 and Line 69 AOTC for DD $2500
1040 Line 52 Child Tax Credit $2000

400% FPL for family of five for Obamacare Subsidy $113,700

I calculated MAGI as follow:
AGI + Tax Exempt Interest + DD's W2 Income = 101,581 + 7277 + 291.20 = 109,149.2

Please let me know if I am missing anything. Key here is to have MAGI below $113,700

 

[RunningBum]

Fill out your tax return. See what line 3 of form 8962 says.

 

[zinger1457]

1040 Line 29 Self Employed Health Insurance Deduction $9755

No personal experience but curious on how the amount entered on this line is determined since you have to subtract out any subsidy received from premiums paid but the amount listed is also used to determine your MAGI to calculate your subsidy. How do you subtract out the subsidy before it's calculated? I'm sure there are tax forms to handle this, one of the tax software programs would definitely be your friend.

 

[retire2020]

I got on Obamacare starting June 1 last year. My premium was $1493 and I had received $612 per month as premium credit.

So my portion of premium was $881 x 7 = 6167
Dental Insurance $235 x 7 = 1645
Employee Subsidized Ins $548 x 5 = 2740
====================================
Total Premium I paid 10,552

Spouse's business income was 10,497 and my W2 was 2647...rest was CG/DIV/Roth Conversion so accountant didnt want to claim whole 10,552 and chose 9755 - that is what he told me.

But question here - Has my accountant correctly calculated MAGI? I think he has missed adding 'Tuition and Fee and half of self employed taxes' to MAGI and the reason why I asked question here to verify if I am correct or accountant or is there anything else I/Accountant missed adding to MAGI calculation. I just do not want to get hit with nasty surprise later that my MAGI goes above 400%FPL and I lose all the subsidy - $7K+ hit. As of now I do have an option to Re-characterize part of Roth conversion to keep MAGI below 400% FPL but I want to be absolutely sure before I go that route.

 

[4legsgood]

No personal experience but curious on how the amount entered on this line is determined since you have to subtract out any subsidy received from premiums paid but the amount listed is also used to determine your MAGI to calculate your subsidy. How do you subtract out the subsidy before it's calculated? I'm sure there are tax forms to handle this, one of the tax software programs would definitely be your friend.

This applies to me, and I googled it a couple years back for turbo tax in particular which is what I use. The software does some kind of iterative calculation on this to get to some negligible diff - the IRS has bought off on it so good enough for me.

 

[Bir48die]

Is there a reason you are taking Tuition deduction and not Lifetime Learning?

 

[retire2020]

Is there a reason you are taking Tuition deduction and not Lifetime Learning?

To keep the MAGI low. Net difference in taxes both ways would've been negligible(20 % of 2500 = $500).

 

[sengsational]

If this is for 2017, then isn't it a done-deal? Oh, I guess you could recharacterize the Roth conversion?

You don't have this in tax software? That would be my first step. That would allow "what if" calculations. You might repeatedly enter larger and larger recharacterizations and monitor your marginal tax rate. Going over 400% FPL is an obvious one, but your marginal rate on the Roth could be eye popping too.

 

[RunningBum]

That was my suggestion. Actually do your taxes, all but filing them. Go to the form I mentioned in the 2nd post and see what you have on the line called MAGI. This is what the IRS will use, unless they dispute how you got there. If you disagree with what your accountant says, you will have to change other parts of the tax return to arrive at that number. You can't have one number for that line, and then claim, "well, I think my MAGI really is $xx,xxx." The IRS is going to use the line on that form to determine whether and how much your subsidy is.

If that line showsno subsidy, reduce your Roth contribution until you get the number you want. Then recharacterize that amount of your Roth.

 

[retire2020]

I think confusion about MAGI calculation was my fault. I was not aware of diff MAGI calculation for diff things like medicaid, chip and traditional IRA contribution. MAGI for obamacare is correct what CPA counted - AGI+Tax Free Interest + DD's W2. There is a also a berkley MAGI calculation sheet out there - http://laborcenter.berkeley.edu/pdf/2013/MAGI_summary13.pdf

About the Self Employed HC deduction: It can not be more than business income minus 1/2 of SE tax..which is 10,497 - 742 = 9755. CPA did not have to go through iteration as we couldnt claim any amount more than 9755.

Runningbum: Line 3 comes to be 109,149(383% FPL) so I am well below 400%FPL and should be ok. CPA will use tax software to determine exact HC deduction if SE income is more than premium we paid. Current portion of our ACA premium is based on projected 110,000 of income for 2018.