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Questions about ACA and deductions
12-08-2019, 04:49 PM
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#1
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Recycles dryer sheets
Join Date: May 2019
Posts: 100
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Questions about ACA and deductions
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?
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12-08-2019, 05:18 PM
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#2
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2009
Posts: 6,698
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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.
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Retired in late 2008 at age 45. Cashed in company stock, bought a lot of shares in a big bond fund and am living nicely off its dividends. IRA, SS, and a pension await me at age 60 and later. No kids, no debts.
"I want my money working for me instead of me working for my money!"
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12-08-2019, 05:49 PM
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#3
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2018
Location: Tampa
Posts: 11,300
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TGIM
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12-08-2019, 05:59 PM
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#4
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Thinks s/he gets paid by the post
Join Date: Jul 2007
Posts: 3,229
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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.
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12-08-2019, 06:31 PM
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#5
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Recycles dryer sheets
Join Date: May 2015
Location: NorCal
Posts: 333
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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.
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12-08-2019, 06:44 PM
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#6
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Thinks s/he gets paid by the post
Join Date: Dec 2014
Posts: 2,511
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I thought paying multiple year payment of property tax was killed by the job and tax act.
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12-08-2019, 06:51 PM
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#7
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2006
Location: Boise
Posts: 7,882
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Quote:
Originally Posted by bingybear
I thought paying multiple year payment of property tax was killed by the job and tax act.
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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.
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"At times the world can seem an unfriendly and sinister place, but believe us when we say there is much more good in it than bad. All you have to do is look hard enough, and what might seem to be a series of unfortunate events, may in fact be the first steps of a journey." Violet Baudelaire.
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12-08-2019, 07:08 PM
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#8
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2006
Location: Boise
Posts: 7,882
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Quote:
Originally Posted by 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?
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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.
__________________
"At times the world can seem an unfriendly and sinister place, but believe us when we say there is much more good in it than bad. All you have to do is look hard enough, and what might seem to be a series of unfortunate events, may in fact be the first steps of a journey." Violet Baudelaire.
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12-09-2019, 02:07 PM
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#9
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Thinks s/he gets paid by the post
Join Date: Feb 2011
Location: central California
Posts: 1,135
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Quote:
Originally Posted by 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.
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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!
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12-09-2019, 02:54 PM
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#10
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2009
Posts: 6,698
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Quote:
Originally Posted by swakyaby
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!
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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.
__________________
Retired in late 2008 at age 45. Cashed in company stock, bought a lot of shares in a big bond fund and am living nicely off its dividends. IRA, SS, and a pension await me at age 60 and later. No kids, no debts.
"I want my money working for me instead of me working for my money!"
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12-09-2019, 07:00 PM
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#11
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2018
Location: Tampa
Posts: 11,300
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Quote:
Originally Posted by swakyaby
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!
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See post #3.
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TGIM
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12-09-2019, 09:48 PM
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#12
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Recycles dryer sheets
Join Date: Nov 2014
Location: Pastures
Posts: 186
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Quote:
Originally Posted by Dtail
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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.
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