Questions about ACA and deductions

[I am He]

I'm curious if anyone knows the negative ramifications of opting to take no subsidy during 2020 (although eligible) and claiming every possibly deduction (this and 2020 property taxes, big health care costs plus itemizing the full health care premium), so our MFJ family qualifies for itemizing deductions in 2020 and then going back to the standard one in 2021. Then when filing for 2020, receiving a large tax return in 2021 (due to not taking the 2020 ACA subsidy).

It seems like I'm double dipping (regarding the healthcare premium) somehow but I'm not sure?

 

[scrabbler1]

The ACA premium subsidy is based on MAGI, an income amount prior to taking any deductions, itemized or standard. As someone who has sometimes qualified for the subsidy and sometimes not, I can tell you that it's erratic income sources, not deductions, which determine if I get a subsidy and if so, how much.

 

[Dtail]

See below for the ACA MAGI rules.

http://laborcenter.berkeley.edu/pdf/2019/magi.pdf

 

[zinger1457]

You're right, you would be double dipping. The actual subsidy you qualify for will be determined when you do your 2020 taxes, you will only be able to itemize your health insurance premium that's above any subsidy received.

 

[FIREd_2015]

I've opted out of monthly subsidy but get it when I file my tax return the following year. I do this mostly because my net rental property and gig income is unpredictable and plus I get 2% of the monthly premium back since I charge it to my Fidelity credit card. As others have said, Schedule A deductions do not change your MAGI.

 

[bingybear]

I thought paying multiple year payment of property tax was killed by the job and tax act.

 

[SecondCor521]

I thought paying multiple year payment of property tax was killed by the job and tax act.

No.

The amount of property taxes you can deduct (actually state and local taxes, or SALT) was limited by the Tax Cuts and Jobs Act.

However, I believe it always has been the case that you are only able to deduct property taxes for which you have been billed and are currently liable. Most property taxing districts will not bill you for future tax years. Around here we pay in arrears, but I doubt anywhere would bill you in advance further than maybe next year.

 

[SecondCor521]

I'm curious if anyone knows the negative ramifications of opting to take no subsidy during 2020 (although eligible) and claiming every possibly deduction (this and 2020 property taxes, big health care costs plus itemizing the full health care premium), so our MFJ family qualifies for itemizing deductions in 2020 and then going back to the standard one in 2021. Then when filing for 2020, receiving a large tax return in 2021 (due to not taking the 2020 ACA subsidy).

It seems like I'm double dipping (regarding the healthcare premium) somehow but I'm not sure?

You could do this. However:

1. You'd have to be paying for your health insurance premiums on an after tax basis in order to deduct them on schedule A. If you're using work provided health insurance, this is probably not the case. Otherwise, it might be.

2. Most importantly, the amount of taxes you'd save by deducting your health insurance premiums on Schedule A is probably a lot less than what your ACA subsidy would be if you took it instead. So I'd give you credit for thinking outside the box, but I think this particular idea isn't worth doing.

 

[swakyaby]

The ACA premium subsidy is based on MAGI, an income amount prior to taking any deductions, itemized or standard. As someone who has sometimes qualified for the subsidy and sometimes not, I can tell you that it's erratic income sources, not deductions, which determine if I get a subsidy and if so, how much.

So other than the HSA contribution deduction, the standard deduction of $24,400 for married couples will not help my MAGI for ACA purposes? Say it isn’t true!

 

[scrabbler1]

So other than the HSA contribution deduction, the standard deduction of $24,400 for married couples will not help my MAGI for ACA purposes? Say it isn’t true!

There are very few ways to reduce your MAGI for ACA purposes. The standard deduction is of no help to lowering MAGI.

One little element of MAGI I didn't like was that if I received a state tax rebate check for SALT paid in a prior year, I had to add it back to MAGI and reduce my ACA subsidy. But if I received the state tax rebate check for SALT paid in the same year, I could use it to reduce the Schedule A SALT I paid and not affect MAGI and reduce the ACA subsidy.

 

[Dtail]

So other than the HSA contribution deduction, the standard deduction of $24,400 for married couples will not help my MAGI for ACA purposes? Say it isn’t true!

See post #3.

 

[GreenER]

See below for the ACA MAGI rules.

http://laborcenter.berkeley.edu/pdf/2019/magi.pdf

In addition to HSA, It's my understanding that capital losses may still be used to offset gains and carry over losses up to $3000 can offset regular income.