IRA management for max ACA benefit

[shotgunner]

I have a question the some here may know the answer to as it relates to monies in and out of an IRA.

I have about $8200 of tax deferred interest on some EE Savings Bonds. I have income from work in 2015 but will not have much income from work in 2016. For the purposes of the ACA tax credit I want to minimize my adjusted gross income for 2015 and generate taxable income in 2016.

Ideally I would like to cash in these Savings Bonds after the 1st of the year which makes the interest taxable income in 2016.

Can I use $6500 of these funds and make a contribution prior to 4/15/16 to my IRA for 2015, reducing my MAGI in 2015.....AND then in October 2016 (when I turn 59 1/2) take the $6500 back out creating taxable income in 2016?

Thanks in advance for your input.

 

[Smitty700]

As long as your MAGI enables you to deduct your IRA contribution (see 2015 IRA Deduction Limits - Effect of Modified AGI on Deduction if You Are Covered by a Retirement Plan at Work) and your earned income for 2015 is greater than or equal to your 2015 IRA contribution, I don't see why this wouldn't work.

 

[pb4uski]

Yes, I don't see why not assuming that you otherwise meet the criterion for a deductible IRA. When you do the withdrawal in 2016 you could do it in the form of a Roth conversion if you don't need the funds and want to keep the funds tax-advantaged.

 

[Animorph]

Yes, I don't see why not assuming that you otherwise meet the criterion for a deductible IRA. When you do they withdrawal in 2016 you could do it in the form of a Roth conversion if you don't need the funds and want to keep the funds tax-advantaged.

+1

 

[shotgunner]

Thanks. My concern was the $6500 in and out would occur in the same calendar year. The contribution prior to 4/15/16 would be for calendar 2015.

It's kind of neat the same $6500 can used to the benefit of getting a larger tax credit in 2015 and used to meet the minimum MAGI needed to get a refundable tax credit in 2016.

The taxable interest from the savings bonds, the $6500 taken out of the IRA in '16 along with dividends and interest will have me in range I need to be to be above Medicaid and qualified for a subsidy.

 

[pb4uski]

Don't you just love it when a plan comes together!!!