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ACA - scrambling back from the subsidy cliff
Old 12-30-2019, 02:50 PM   #1
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ACA - scrambling back from the subsidy cliff

I fell of the ACA subsidy cliff in 2017 and 2018 because of Capital Gains Distributions. This year I didn't ask for any subsidies.

And I am now realizing that with much lower CGs, I may actually qualify for the subsidies that I didn't take.

Details:
Household: myself and 2 kids.
My ex and I usually trade off the deduction each year (made more difficult with ACA subsidies and coverage across state lines). So I was thinking I was a 2 person household, when in fact I am a 3 person household.

I got a marketplace plan for myself and one child. (that's the easy part)
My ex got a (minimal) plan for our college kid in January, but dropped it in June - told both of us in July that it was cancelled.

Starting in August, I bought a plan from the college (Aug - July coverage)


Is claiming him as a dependent on my 2019 taxes sufficient to raise my household to 3 people and qualify me for the $81k threshhold?

Are the 2 different plans (purchased by 2 different people) with a gap in between going to disqualify us from the subsidy?


On a side note/Tax Loophole?
Without claiming the subsidy, my ACA premiums are high enough to allow me to have a Medical Deduction on my taxes. So - lower taxes than if I had claimed subsidies all along.

It would seem that by deciding to NOT have the premiums reduced, then waiting to claim the subsidy on my taxes in April, would I not get BOTH the Schedule A deduction and also claim the entire subsidy. (Just need the cash flow to make it happen... but seems like it would net me more $$ Or am I missing something? )
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Old 12-30-2019, 03:45 PM   #2
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Quote:
Originally Posted by BeanCounter62 View Post
I fell of the ACA subsidy cliff in 2017 and 2018 because of Capital Gains Distributions. This year I didn't ask for any subsidies.

And I am now realizing that with much lower CGs, I may actually qualify for the subsidies that I didn't take.

Details:
Household: myself and 2 kids.
My ex and I usually trade off the deduction each year (made more difficult with ACA subsidies and coverage across state lines). So I was thinking I was a 2 person household, when in fact I am a 3 person household.

I got a marketplace plan for myself and one child. (that's the easy part)
My ex got a (minimal) plan for our college kid in January, but dropped it in June - told both of us in July that it was cancelled.

Starting in August, I bought a plan from the college (Aug - July coverage)


[1] Is claiming him as a dependent on my 2019 taxes sufficient to raise my household to 3 people and qualify me for the $81k threshhold?

[2] Are the 2 different plans (purchased by 2 different people) with a gap in between going to disqualify us from the subsidy?


On a side note/Tax Loophole?
Without claiming the subsidy, my ACA premiums are high enough to allow me to have a Medical Deduction on my taxes. So - lower taxes than if I had claimed subsidies all along.

It would seem that by deciding to NOT have the premiums reduced, then waiting to claim the subsidy on my taxes in April, would I not get BOTH the Schedule A deduction and also claim the entire subsidy. (Just need the cash flow to make it happen... but seems like it would net me more $$ [3] Or am I missing something? )
[Bracketed numbers added.]

1. Yes. However, a few caveats you should be aware of:

First, you should make sure he qualifies as your dependent. He may or may not. Check all the IRS requirements, but in particular you'd need to make sure that your ex is not entitled to the deduction (due to support, residency, or divorce decree) and that the college kid didn't provide more than half of his own support.

Second, if he has to file a tax return other than to get a refund, you would have to add his income on your tax return for purposes of determining your ACA premium tax credit. His income could reduce or eliminate any premium tax credit to which you would be entitled.

Third, if you're going to claim a family size of 3, you'll need to check with your marketplace for the applicable SLCSP, as the one on your Form 1095-A may be based on a family size of 2.

2. I don't know for sure, but I don't think so. The eligibility requirements are listed in the instructions for Form 8962. Note that the subsidies are calculated on a monthly basis (see middle of Form 8962), so you may need to fill in those rows individually.

3. I think the rules prohibit you from using any ACA-related premiums as a Schedule A medical deduction. I trust you are aware that your medical expenses are only deductible to the extent that they exceed 7.5% of your AGI?
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Old 12-30-2019, 03:59 PM   #3
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Quote:
Originally Posted by BeanCounter62 View Post
Starting in August, I bought a plan from the college (Aug - July coverage)

Is claiming him as a dependent on my 2019 taxes sufficient to raise my household to 3 people and qualify me for the $81k threshhold?
Yes, if you can legally claim him as a dependent on your 1040, then your "tax family" size for purposes of the ACA premium tax credit calculation is 3. If you claim him, then your ex-wife cannot claim him.

Quote:
Originally Posted by BeanCounter62 View Post
Are the 2 different plans (purchased by 2 different people) with a gap in between going to disqualify us from the subsidy?
No.

Quote:
Originally Posted by BeanCounter62 View Post
On a side note/Tax Loophole?
Without claiming the subsidy, my ACA premiums are high enough to allow me to have a Medical Deduction on my taxes. So - lower taxes than if I had claimed subsidies all along.

It would seem that by deciding to NOT have the premiums reduced, then waiting to claim the subsidy on my taxes in April, would I not get BOTH the Schedule A deduction and also claim the entire subsidy. (Just need the cash flow to make it happen... but seems like it would net me more $$ Or am I missing something? )
The amount of premiums you can deduct on Sched A is the total you paid out of pocket minus the amount of the credit you claim on form 8962. So there's no tax difference in whether you take the subsidy in advance or not.

The only advantage would be if you claim too much advance subsidy and then hit the cap on how much you have to pay back. For example, if you plan to earn 200% of the FPL and end up earning 350%, then you might owe back upwards of $3K, but the max you have to return to the gov't for 2019 is $2600. However, doing that intentionally is tax fraud, and I am definitely not recommending it!
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Old 12-31-2019, 03:01 AM   #4
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Thanks for the responses.

After 2 years falling off the cliff, I may actually scramble back from it this year.

I'll keep in mind the Heads Up about making sure I have the 3 person SLCSP number.

I do see how the ACA premiums are pulled out from medical expenses in Turbo Tax. (And yes - even w/o the premiums, my medical expenses this year were high due to pacemaker surgery, so I will still have a medical deduction.)
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Old 12-31-2019, 06:34 AM   #5
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off topic --beancounter, if this was a replacement, did this just blow your max out of pocket? or did they find a bunch of charges that were not covered? I'm curious as I should get a replacement in the next couple years.
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Old 01-01-2020, 02:34 AM   #6
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off topic --beancounter, if this was a replacement, did this just blow your max out of pocket? or did they find a bunch of charges that were not covered? I'm curious as I should get a replacement in the next couple years.
bingybear - yes it was a replacement pacemaker, which I knew was coming.
I hit the max OOP ...so everything else this year was $0 (including an echo which I managed to pull in to this year). No extra charges that weren't covered. $104,000 was the list price... thankful for insurance.... I even got a 15% discount for paying my copay on the same day and saved $800 which was still counted towards my $6,500 OOP. And this one is predicted to last 9 years, which gets me to Medicare.
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Old 01-01-2020, 06:56 AM   #7
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Thx. I'm on the verge of 59 so this will likely be the only change before medicare too. I have a dual chamber so the timing might be different. The one I have does not have great telemetry...all it gives for life left is the battery voltage. I have a dual chamber MRI compliant one.
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Old 01-01-2020, 08:21 AM   #8
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Not really the same as I am on Medicare, but a good FYI. of things to come.

I had a replacement dual PM "last year" in 2019. I have basic Medicare + Part G. No extra charges at all for me. All fully covered, from pre-op to post opp. Medicare costs + Part G = $3,791.76 for the year so my MOOP was $3,791.76.
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