Tax Question: Downsizing vs. ACA Subsidies

[daylatedollarshort]

If we sell our current house, I know for a married couple we would get up to a $500K exclusion from capital gains taxes.

But how will this impact ACA subsidies? Do we lose those in the year we sell the house? We would be over the 400% O-MAGI in the year we sell the house, if the excluded capital gains from the house are included in the O-MAGI amount.

From what I have read we would also not get the 3.8% Medicare tax on excluded capital gains amount of $500K or less. Is that correct?

[Accidental Retiree]

That is an interesting question. It never occurred to me that excluded capital gains from house sale would be part of O-MAGI.

But if they are included, then wouldn't turning around and paying cash for another, albeit less expensive, house exclude some of that not-excluded-after-all CG?

[daylatedollarshort]

Quote:

Originally Posted by Accidental Retiree That is an interesting question. It never occurred to me that excluded capital gains from house sale would be part of O-MAGI. But if they are included, then wouldn't turning around and paying cash for another, albeit less expensive, house exclude some of that not-excluded-after-all CG?

I think buying a new house will work for the asset part of the college financial aid test, but I don't think it would change our MAGI for FAFSA for college aid and the ACA income test.

[MichaelB]

If you qualify for the exclusion you never report the capital gain, so it never becomes part of AGI. It is not an "add back" item, so no, home sale proceeds eligible for the exclusion should not affect the calculation for ACA premium assistance.

[daylatedollarshort]

Quote:

Originally Posted by MichaelB If you qualify for the exclusion you never report the capital gain, so it never becomes part of AGI. It is not an "add back" item, so no, home sale proceeds eligible for the exclusion should not affect the calculation for ACA premium assistance.

Okay, thanks. That is what I wasn't sure about.

[Accidental Retiree]

Quote:

Originally Posted by MichaelB If you qualify for the exclusion you never report the capital gain, so it never becomes part of AGI. It is not an "add back" item, so no, home sale proceeds eligible for the exclusion should not affect the calculation for ACA premium assistance.

Thanks for the confirmation.

[dtbach]

Will a ROTH account ever be "means tested" for the ACA? Since I paid future taxes to shield several million I hope not.

[dtbach]

It's a great thing that ACA is allowing more people to ER and get benefits paid for by the younger, healthier job workers. We did our part, now they can do theirs.