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Old 10-28-2016, 08:22 PM   #21
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I could use Berkshire for some of my investments, but I still want to diversify. Are there funds or ETF's that do not pay dividends or cap gains? I suppose that is what the tax efficient funds do - right?
LargeCap Growth index funds in general have lower dividends than broad market funds. For example: SCHG, VUG, IUSG.
Similarly, SmallCap Growth index funds like VBK, IJT also have lower dividends.

If you are into sector investing, look at healthcare index funds like VHT, FXH, XLV. Biotech funds (e.g. IBB, BBH, XBI) also have very low dividend yields (appreciation is mostly in undistributed capital gains) but these are very volatile.
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Old 10-29-2016, 08:45 AM   #22
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Consider QQQ which has a dividend of about 1% vs. VTI which is about 2%.
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Old 10-29-2016, 09:33 AM   #23
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What a pathetic situation, expending time and effort to reduce income so one can qualify for government subsidies. A great example of how perverse incentives send our economy down the crapper and turn otherwise good people into welfare queens.
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Old 10-29-2016, 10:00 AM   #24
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What a pathetic situation, expending time and effort to reduce income so one can qualify for government subsidies. A great example of how perverse incentives send our economy down the crapper and turn otherwise good people into welfare queens.
Really?? I don't have a need for this yet but I see this is fair play. We didn't make the rules but I'll sure take advantage of any lawful financial break our system provides, from tax deductions to ACA subsidy.
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Old 10-29-2016, 10:13 AM   #25
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We can disagree without being disagreeable. This is a thread topic discussed many times and many find it useful, so let's keep it friendly, please.
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Old 10-29-2016, 03:39 PM   #26
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I think the best thing you can do is structure things to be 'near' the limit. Then close to end of year look at you income and dividends that year and use the hsa and ira options if applicable to lower your magi for aca if needed.

18k subsidy is HUGE for someone close to 400% fpl unless you are in alaska. Are you sure your subsidy amount is correct?
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Old 10-29-2016, 03:52 PM   #27
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Well if you can't get an HSA plan or don't have W-2 income those two ideas won't help you much!
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Old 10-29-2016, 03:59 PM   #28
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I think the best thing you can do is structure things to be 'near' the limit. Then close to end of year look at you income and dividends that year and use the hsa and ira options if applicable to lower your magi for aca if needed.

18k subsidy is HUGE for someone close to 400% fpl unless you are in alaska. Are you sure your subsidy amount is correct?
No IRA or HSA options are available to me.

Yes the 18k subsidy is huge in AZ because the second lowest cost silver plan (there are only two to choose from) is priced at $24,000 for two of us.

I appreciate all of the advice from everyone. I think I will just have to stick with index funds and ETF's that do not distribute cap gains. I can handle the dividend income, just not the late December capital gain dumps.

Thanks again.
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Old 10-29-2016, 04:08 PM   #29
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What a pathetic situation, expending time and effort to reduce income so one can qualify for government subsidies. A great example of how perverse incentives send our economy down the crapper and turn otherwise good people into welfare queens.
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Really?? I don't have a need for this yet but I see this is fair play. We didn't make the rules but I'll sure take advantage of any lawful financial break our system provides, from tax deductions to ACA subsidy.
Panacea, I read gcgang's post as lamenting the rule that makes people do this, and not about the OP's action.

I live in the same place as the OP. I used to pay $800/month without fooling around with subsidies, but would rather do that than messing around with subsidies. With the premium going to $2K/month, I will have to do something. I do not like it even if I may pay even less if I manage it right.
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Old 10-29-2016, 04:14 PM   #30
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Nice ivinsfan!

Packman. Another approach is to try to bunch it so that one year you qualify and the next year you dont. Ofhers mentioned real estate. Another good option. There are passive options for you especially if you are accrediteed.
While long term it is definitely a bad idea you can consider moving more money into cash right now to lower dividends. Eventually aca will sort out the outliers like your situation with 24k premiums (or we hope).
While i would never let the tax dog wag the investment tail too much. Right now i would be ok putting more in cash to lower income for a few years until this gets sorted out.

Good luck. Very frustrating situation.
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Old 10-29-2016, 04:21 PM   #31
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I got caught one year having to pay (double? I forget) for Medicare because of a couple of moves I made. I wasn't smart enough or observant enough to avoid the mistake. That was a pretty small amount in total compared to $18K. I have no problem with folks gaming the system we have to their advantage. I just see, going forward that the "game" is going to get more and more complicated as the gummint gets involved and then sets all the rules for just about everything. The only thing more effective in "controlling" citizens' behaviors than (their own) money is the point of a gun. End of rant and returning you now to our discussion because YMMV.
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Old 10-29-2016, 04:39 PM   #32
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You could buy some websites on a place like flippa, put ads on them and deduct the cost of the sites as a business expense. Or buy some domain names to park and put ads on them. Now you have an actual business as a web site or domain owner. Maybe spending $2K could save you $24K.
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Old 10-29-2016, 06:33 PM   #33
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Panacea, I read gcgang's post as lamenting the rule that makes people do this, and not about the OP's action.

I live in the same place as the OP. I used to pay $800/month without fooling around with subsidies, but would rather do that than messing around with subsidies. With the premium going to $2K/month, I will have to do something. I do not like it even if I may pay even less if I manage it right.
We live in Maricopa County as well. Sure is a whacky market. Last year GF (age 60), whose only income is TIRA to Roth conversions of $17.5k, had a BCBS plan that was $650 per month with $355 in monthly subsidies. Net payment by her is $295 per month. $4k deductible. $6k out of pocket max.

Next year she will convert the same $17.5 k from TIRA to Roth. Based on initial look for a similar silver plan the rate is $1076. With a subsidy of $1015 per month. Monthly payment...$61.00. Yearly deductible is now $5! Yes that is 5 dollars! Out of pocket max is $1250.

Can someone explain how this happens? Granted she didn't have the cheapest silver plan last year but this just doesn't seem to make sense. The plans (there are only two silver plans available in the county, both from the same company) have not released there provider list yet so we aren't sure of the docs or hospitals. No out of network except for emergencies but other than that the plans look fairly comparable.

I just don't understand this!
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Old 10-29-2016, 06:45 PM   #34
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I second that! Easiest way to have negative income, at least on the paper. I am in my 3rd year and still negative income on paper. Positive cashflow every year nevertheless. 30K cash flow and -5K income!
Won't this come back to bite him when he has to pay the recapture tax on depreciation? Recapture is 25% (is that correct?), and if his income is 65K then he'd likely be in the 15% bracket...
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Old 10-29-2016, 06:52 PM   #35
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Get a divorce.

One person can be the higher income person, and the other get market place healthcare. The other could be eligible for a 100% subsidized healthcare. $0 premium, $0 deductible. The lower person could also be doing the IRA to Roth rollovers.

There are many other financial benefits to the divorce strategy too.
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Old 10-29-2016, 06:59 PM   #36
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Get a divorce.

One person can be the higher income person, and the other get market place healthcare. The other could be eligible for a 100% subsidized healthcare. $0 premium, $0 deductible. The lower person could also be doing the IRA to Roth rollovers.

There are many other financial benefits to the divorce strategy too.
Senator this was why we missed you, you always think outside the box
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Old 10-29-2016, 07:06 PM   #37
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Senator this was why we missed you, you always think outside the box
I am actually working now on lowering my own income using a self-directed IRA. It could save a lot of taxes for me.

Even with ~$70K of depreciation, I still have a 6-figure income. I need to do something too.


Adopting a kid from a foreign country for a tax deduction was frowned upon here, so maybe she needs to be 18+... Woody Allen made it work.
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Old 10-29-2016, 09:59 PM   #38
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.....
I appreciate all of the advice from everyone. I think I will just have to stick with index funds and ETF's that do not distribute cap gains. I can handle the dividend income, just not the late December capital gain dumps.
......
I only buy ETF's and stocks, never mutual funds (except in IRA) for the very reason of the end of year surprise.

Due to some DW's mutual funds Which I've always hated, we had a surprise of $90,000. So beyond paying lots in taxes, we got a penalty for not paying enough estimated tax, which would have been enough without the surprise..

They never surprise you with a lose which could be useful or carried forward.

We sold that mutual fund and stuck it in ETF's in order to stop the surprises going forward.
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Old 10-30-2016, 05:02 AM   #39
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I am in exactly the same boat as the posters from AZ. In central PA we went from 51 plans to 6 in two years. Not one bronze plan is being offered either. Our premiums will go from $927 for three of us to $1900-2200 for two. DS would have an unsubsudized premium if $345, or $250 for a catastrophic plan. We've already overpaid our income tax this year, so I'm going to sell some more sticks and funds and create a larger cash position, something I need to do anyway. Like other posters here, our subsidy will also be $18K annually.

Thankfully the discussions here have sprung ideas in how we can get the subsidy. One thing is certain--I can no longer afford to work.

Although I'm concerned about future years, it's clear everyone under estimated the medical needs of the previous uninsured and this huge jump is unlikely to be replicated.

The next step is to address the blatant greed in health care. When there are monopolies in many situations, thinking drug companies, equipment manufacturers, electronic records, health care systems, and costs are obscured by third party payers, this is what we can expect.

Machines that measure blood pressure and pulse oximetry and cost $15K. Light sources for phototherapy for jaundiced babies which are simply an array of LEDs costing thousands of dollars. Physical therapy at $600 per session. Cortisone injections in which the charge is $3000 per injection.

Electronic records systems that cost the hospital system over $100 million.

Unfortunately we don't know if anyone can or will address these systemic problems.

When millionaires need and qualify for subsidies then there is a problem. The problem isn't that our MAGI is too low. It's that the cost is too high.

Don't criticize us for acting legally in our own self-interest. It's the American way.
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Old 10-30-2016, 05:36 AM   #40
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I am in exactly the same boat as the posters from AZ. In central PA we went from 51 plans to 6 in two years. Not one bronze plan is being offered either. Our premiums will go from $927 for three of us to $1900-2200 for two. DS would have an unsubsudized premium if $345, or $250 for a catastrophic plan. We've already overpaid our income tax this year, so I'm going to sell some more sticks and funds and create a larger cash position, something I need to do anyway. Like other posters here, our subsidy will also be $18K annually.
Do you mind if I say that I am glad to see that we Arizonans are not alone? Misery loves company.

But some other states will have premium less than 1/2 of what we pay. It kills me to find out what makes the demographics of our states so different than the rest of the country.

Quote:
Thankfully the discussions here have sprung ideas in how we can get the subsidy. One thing is certain--I can no longer afford to work.
I shudder when thinking of small business owners or independent entrepreneurs who are forced to cut back their income to be below the cliff. What would you do? Open your store only 3 days a week? Cut your own hours to part-time, instead of trying to grow your business?

Quote:
Although I'm concerned about future years, it's clear everyone under estimated the medical needs of the previous uninsured and this huge jump is unlikely to be replicated.
Once "the rat is digested by the snake" as a poster in another thread suggested, will the rates go down? Hope springs eternal.

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The next step is to address the blatant greed in health care. When there are monopolies in many situations, thinking drug companies, equipment manufacturers, electronic records, health care systems, and costs are obscured by third party payers, this is what we can expect.
Knowing that you are an MD, I thank you for saying this.
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