Any option when ACA Plan Premium less than Tax Credit?

[bobandsherry]

As I compare options for 2018 there's a bronze plan that seems to be a "good fit" for coverage. Net premium is $0/mo (tax credit of $1,390, plan premium $1,290). That leaves $100/mo on the table with unused tax credit. So my question is, is there something that I'm not considering that would help to maximize tax credit so I'm not leaving $100/mo on the table?

Additionally, the next least costly premium (after tax credit) is $261/mo (also a bronze plan) and HSA plan is $328. Neither offers any better coverage than the $0/mo plan, so doesn't really come out better to pay out of pocket for these.

 

[Curmudgeon]

1) what if you 'fudged' a little bit on your application by estimating your income a little bit high... then your premium tax credit would go down a bit, and you could tweak it to have credit = premium. Next April when you file taxes, your actual income will be known, and the credit will be recalculated higher. Wuuldn't you then get this as a credit to apply against your taxes? Or, does the recalculation involve the cost of the premium?

2) If nothing else, you could reduce your premium credit by realizing a bit more income (convert some money to Roth, realize some capital gains, etc.) which can now be done 'for free' - no increase in taxes.

 

[ivinsfan]

As I compare options for 2018 there's a bronze plan that seems to be a "good fit" for coverage. Net premium is $0/mo (tax credit of $1,390, plan premium $1,290). That leaves $100/mo on the table with unused tax credit. So my question is, is there something that I'm not considering that would help to maximize tax credit so I'm not leaving $100/mo on the table?

Additionally, the next least costly premium (after tax credit) is $261/mo (also a bronze plan) and HSA plan is $328. Neither offers any better coverage than the $0/mo plan, so doesn't really come out better to pay out of pocket for these.

Yes well the thing you aren't considering that apparently you aren't really happy with a Zero cost Bronze Plan...you'll need to elaborate as to why this isn't a good outcome for you. The credit goes to defray the cost HI, your cost is Zero.. I'd say it served its purpose.

 

[pb4uski]

As I compare options for 2018 there's a bronze plan that seems to be a "good fit" for coverage. Net premium is $0/mo (tax credit of $1,390, plan premium $1,290). That leaves $100/mo on the table with unused tax credit. So my question is, is there something that I'm not considering that would help to maximize tax credit so I'm not leaving $100/mo on the table? ....

The least costly silver plan?

 

[MichaelB]

The least costly silver plan?

Yeah, that's my first thought as well. That bronze plan has at least $6K deductible.

 

[pb4uski]

....2) If nothing else, you could reduce your premium credit by realizing a bit more income (convert some money to Roth, realize some capital gains, etc.) which can now be done 'for free' - no increase in taxes.

+1 if a better HI policy isn't available then you could do some Roth conversions and not impact your net health insurance cost.

 

[FUEGO]

2) If nothing else, you could reduce your premium credit by realizing a bit more income (convert some money to Roth, realize some capital gains, etc.) which can now be done 'for free' - no increase in taxes.

I would suggest this too. Bump up your income through Roth conversions or cap gain harvesting to get your ACA PTC subsidy equal to your annual premiums.

 

[RunningBum]

1) what if you 'fudged' a little bit on your application by estimating your income a little bit high... then your premium tax credit would go down a bit, and you could tweak it to have credit = premium. Next April when you file taxes, your actual income will be known, and the credit will be recalculated higher. Wuuldn't you then get this as a credit to apply against your taxes? Or, does the recalculation involve the cost of the premium?

No, in form 8962, Premium Tax Credit, I don't think it'll let you take more. In line 11(e) you enter the smaller of your actual premium or your maximum subsidy, and this will keep you from getting extra back. That's how I see it from looking at the form. I didn't try an actual tax run with it.

2) If nothing else, you could reduce your premium credit by realizing a bit more income (convert some money to Roth, realize some capital gains, etc.) which can now be done 'for free' - no increase in taxes.

Yes, that's my thought, take more income if you've got room under 400% FPL. Or see if a silver plan with lower deductible and co-pays works better for you even if it costs a bit in premiums.

Last case, be happy with 0 premium, though I understand wanting to try to make the most of your subsidy.

 

[bobandsherry]

1) what if you 'fudged' a little bit on your application by estimating your income a little bit high... then your premium tax credit would go down a bit, and you could tweak it to have credit = premium. Next April when you file taxes, your actual income will be known, and the credit will be recalculated higher. Wuuldn't you then get this as a credit to apply against your taxes? Or, does the recalculation involve the cost of the premium?

2) If nothing else, you could reduce your premium credit by realizing a bit more income (convert some money to Roth, realize some capital gains, etc.) which can now be done 'for free' - no increase in taxes.

My income is as "fudge" as I want to make it

I get what you are saying, but I'm not understanding how having a higher estimated MAGI would actually provide a benefit come tax filing time. It's been a long day and my brain is a bit fried, but I'll have to think further on that.

 

[bobandsherry]

No, in form 8962, Premium Tax Credit, I don't think it'll let you take more. In line 11(e) you enter the smaller of your actual premium or your maximum subsidy, and this will keep you from getting extra back. That's how I see it from looking at the form. I didn't try an actual tax run with it.

That was how I had looked at it, but there's better minds on here than mine so I'll need to take a look into that.

Or see if a silver plan with lower deductible and co-pays works better for you even if it costs a bit in premiums.

I've been crunching numbers on plans for a couple days and I had looked at silver plan as well. The silver plan was $4K in premiums, that's more than I would estimate I'll pay in medical costs. I considered costs for emergency room and/or outpatient type of expenses and would need $8K in those costs to break even. Worst case for one of us going over the OOP is about $1K more costly for bronze plan.

Last case, be happy with 0 premium, though I understand wanting to try to make the most of your subsidy.

Yep, I'm happy, but I thought I'd ask if there was something obvious I was missing.

 

[RunningBum]

My income is as "fudge" as I want to make it

I get what you are saying, but I'm not understanding how having a higher estimated MAGI would actually provide a benefit come tax filing time. It's been a long day and my brain is a bit fried, but I'll have to think further on that.

Suppose you would get a $1200 subsidy at 300% FPL and that it what you were targeting. Suppose for every 1% more you go up, you lose $4, so at 325% you'd get an $1100 subsidy, 350% $1000, and so on.

If the plan you want is only $900, you could dial up your income to the 375% level, and qualify for a $900 subsidy, so your premium would still be $0. But you were able to use that extra income all the way up to 375% FPL to convert to a Roth at a low tax rate or take LTCG at 0%, and not leave any of the subsidy on the table. That's your goal, right?

You know what the premium you want costs; there's a screen that asks for your income, and then tells you your subsidy. Keep backing up and bumping up your income until the subsidy matches your premium. Of course, if you get over 400% and lose the subsidy, that's as far as you can go.

 

[pb4uski]

My income is as "fudge" as I want to make it

I get what you are saying, but I'm not understanding how having a higher estimated MAGI would actually provide a benefit come tax filing time. It's been a long day and my brain is a bit fried, but I'll have to think further on that.

I think what people are suggesting is to do Roth conversions to increase your income so your subsidy reduces from $1,390 to $1,290... your subsidized health insurance cost is still $0 but you get some Roth conversions at a low tax cost or tax-free depending on your circumstances.

 

[bobandsherry]

The least costly silver plan?

The premium for the least costly silver plan was $4K, that's more than what I estimate my OOP would be with co-pays on bronze. Co-pays for doctor visits with bronze is $35/$65, and first three visits to primary are no cost. Prescription costs are basically the same between the two as well. I had thought going into this the silver would be my plan of choice, but number crunching, based on usage this year, just pointed me to bronze plan. Guess I'll just consider myself fortunate to have a reasonable plan for my needs available.

 

[bobandsherry]

Suppose you would get a $1200 subsidy at 300% FPL and that it what you were targeting. Suppose for every 1% more you go up, you lose $4, so at 325% you'd get an $1100 subsidy, 350% $1000, and so on.

If the plan you want is only $900, you could dial up your income to the 375% level, and qualify for a $900 subsidy, so your premium would still be $0. But you were able to use that extra income all the way up to 375% FPL to convert to a Roth at a low tax rate or take LTCG at 0%, and not leave any of the subsidy on the table. That's your goal, right?

I think what people are suggesting is to do Roth conversions to increase your income so your subsidy reduces from $1,390 to $1,290... you subsidized health insurance cost is still $0 but you get some Roth conversions at a low tax cost or tax-free depending on your circumstances.

Thanks RB and pb, I think I see the subtlety of how this would be beneficial.