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Tax Planning Strategy question
Old 12-11-2016, 10:53 AM   #1
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Tax Planning Strategy question

I am FIREd and now have an AGI of ~$33k. I participate in ACA and get a subsidy based on my AGI. With my deductions, I planned to break even on income taxes this year, as I did last year. However, I recently sold a real estate parcel with a loss of ~$30K. This would make my AGI ~3K for 2016. From a tax planning perspective, should I leave all alone and get back a refund on the health insurance premium, or should I plan some Roth Conversions?
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Old 12-11-2016, 11:08 AM   #2
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If you have a $30k capital loss, only $3k can be applied to reduce ordinary income... so what your AGI will be depends on how much of the $33k is ordinary income and how much are capital gains. If your $33 is all ordinary income, then your AGI will be $30k, not $3k.

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Old 12-11-2016, 12:47 PM   #3
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Some Roth conversions might fit in nice here. In the worst case, you do your final tax calculations in April 2017, find out you don't like the Roth conversion, and recharacterize it. It will be as if it never happened. Or partially recharacterize to hit the ACA MAGI limit precisely.

The usual conversion guidelines apply. Are the converted dollars taxed at a lower (or at least equal) tax rate than at age 70.5 when RMD's start?

And it may be that the amount you can beneficially convert is not enough to hassle with.
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Old 12-11-2016, 03:01 PM   #4
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I do not have ACA insurance, but I believe I have read that if your income is too low, you are put into Medicaid, and do not get a subsidized policy from the exchange. If that is correct you may not want that to happen.
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Old 12-11-2016, 03:09 PM   #5
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Your strategy should include seeing -$3,000 on line 13 for the next 10 years.
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Old 12-11-2016, 04:20 PM   #6
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Given the tax system is likely to change a lot next year, I wouldn't plan anything beyond 2016.
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