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They should count income from tax deferred accounts for ACA subsidy
Old 02-23-2019, 10:26 AM   #1
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They should count income from tax deferred accounts for ACA subsidy

Not sure why they don't count investment income from tax deferred accounts for calculating the amount of subsidy one gets. If the purpose is affordability, then all income should be counted. The same reason tax exempt income is included. If our same investment income was earned inside tax deferred vehicle not only we would have not paid income tax on it but would have saved tons of additional tax and qualified for ACA. This is not just redistribution of wealth from have to have nots.

It is bad enough that we don't qualify for subsidy and that our premium has tripled in last 4 years, and now we have to pay $54,000 as additional tax for ACA program.

Just venting here as I will have to write a big check soon.
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Old 02-23-2019, 10:30 AM   #2
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It is bad enough that we don't qualify for subsidy and that our premium has tripled in last 4 years, and now we have to pay $54,000 as additional tax for ACA program.
How do you figure that?
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Old 02-23-2019, 10:32 AM   #3
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How do you figure that?
Its the additional tax on our investment income this year. Will not be as high or zero going forward.
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Old 02-23-2019, 10:34 AM   #4
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Not sure why they don't count investment income from tax deferred accounts for calculating the amount of subsidy one gets. If the purpose is affordability, then all income should be counted. The same reason tax exempt income is included. If our same investment income was earned inside tax deferred vehicle not only we would have not paid income tax on it but would have saved tons of additional tax and qualified for ACA. This is not just redistribution of wealth from have to have nots.

It is bad enough that we don't qualify for subsidy and that our premium has tripled in last 4 years, and now we have to pay $54,000 as additional tax for ACA program.

Just venting here as I will have to write a big check soon.
I also see that the employer-paid premiums are exempt. No?

"Employer-paid premiums for health insurance are exempt from federal income and payroll taxes. Additionally, the portion of premiums employees pay is typically excluded from taxable income. "
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Old 02-23-2019, 10:36 AM   #5
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I also see that the employer-paid premiums are exempt. No?

"Employer-paid premiums for health insurance are exempt from federal income and payroll taxes. Additionally, the portion of premiums employees pay is typically excluded from taxable income. "
Well, if they have employer paid premium. then one does have to worry about subsidy or paying a high cost to get healthcare.
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Old 02-23-2019, 10:42 AM   #6
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... If the purpose is affordability ...
ACA has nothing to do with affordability. Incomes up to 100K (family of 4 example) get still get subsidies.
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Old 02-23-2019, 10:47 AM   #7
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ACA has nothing to do with affordability. Incomes up to 100K (family of 4 example) get still get subsidies.
If income up 100K gets ACA, then why not income over 500K? And in some areas in north east and CA, 100K for family of 4 is really not much to spend on necessities.

What do you think the first A in ACA is for?
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Old 02-23-2019, 10:52 AM   #8
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Its the additional tax on our investment income this year. Will not be as high or zero going forward.
Oh, OK. When I pay taxes I just send them in and don't know how they are used. I guess you figured out yours were all specifically going to ACA.

I think some of that went to me. Thank you very much. Please keep it up, I'm planning on the subsidy in 2019. Maybe we can cut out the middle man and you just mail me a check? Oh, but you said it might be zero going forward. Too bad.
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Old 02-23-2019, 10:56 AM   #9
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Oh, OK. When I pay taxes I just send them in and don't know how they are used. I guess you figured out yours were all specifically going to ACA.

I think some of that went to me. Thank you very much. Please keep it up, I'm planning on the subsidy in 2019. Maybe we can cut out the middle man and you just mail me a check? Oh, but you said it might be zero going forward. Too bad.
No. I am not talking about income tax. The $54,000 is just the 3.8% additional tax on investment which is all going to ACA. And you welcome.
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Old 02-23-2019, 10:56 AM   #10
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This is a policy discussion, so the thread was moved to the more appropriate forum.
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Old 02-23-2019, 10:58 AM   #11
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Am I missing something? I'm pretty sure that TIRA/T401K withdrawals *are* part of the MAGI which determines the amount of subsidy, if any. Roth accounts, on the other hand, are not.

I remember when the ACA was preparing to be rolled out and a lot of folks were talking about doing a couple of years of Roth conversions so they could have more excluded income. That was because most retirement income *is* included, save for that coming from a Roth.
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Old 02-23-2019, 11:04 AM   #12
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I'm confused. Tax deferred income (dist. from a trad, ira) is part of MAGI iro ACA
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Old 02-23-2019, 11:05 AM   #13
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Am I missing something? I'm pretty sure that TIRA/T401K withdrawals *are* part of the MAGI which determines the amount of subsidy, if any. Roth accounts, on the other hand, are not.
Yes they are. But not the investment income you don't withdraw. For example Mitt Romney is suppose to have 500M in tax deferred account. The money is earning millions more in investment income. If he was to have no other income, he would still qualify for ACA if he had no distribution from those accounts. This is an extreme case, I am sure there are many who won't qualify if that income was included.
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Old 02-23-2019, 11:11 AM   #14
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In general tax is not levied until the income is realized. Deferred income has not yet been realized.
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Old 02-23-2019, 11:15 AM   #15
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In general tax is not levied until the income is realized. Deferred income has not yet been realized.
In general tax, no tax is paid on tax exempt income, so why count that toward ACA income?

Deferred income (interest, dividends) are realized as it is added to your account, but not taxed.
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Old 02-23-2019, 11:18 AM   #16
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Originally Posted by Cpadave View Post
If income up 100K gets ACA, then why not income over 500K? And in some areas in north east and CA, 100K for family of 4 is really not much to spend on necessities.

What do you think the first A in ACA is for?
Because that is the law that was passed.

Affordable.

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No. I am not talking about income tax. The $54,000 is just the 3.8% additional tax on investment which is all going to ACA. And you welcome.
It sounds like you are talking about the Net Investment Income Tax. If that is the case and I have done my math and inferences correctly, you and your family have slightly over $1.4M in investment income in 2018, in addition to whatever wages you earned.
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Old 02-23-2019, 11:20 AM   #17
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Yes they are. But not the investment income you don't withdraw. For example Mitt Romney is suppose to have 500M in tax deferred account. The money is earning millions more in investment income. If he was to have no other income, he would still qualify for ACA if he had no distribution from those accounts. This is an extreme case, I am sure there are many who won't qualify if that income was included.
Oh, I see what you are saying. But you referred to "investment income" in the OP, and in the general case, tax law does not consider gains kept within a tax-deferred account to be "income" -- until you withdraw it. That is nothing new with the ACA; that is all over the tax code.
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Old 02-23-2019, 11:23 AM   #18
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So you had a $1.5 million dollar year for your taxable investments?

Maybe you could look at the bright side here? Not all doom and gloom, right?


Also, if they counted tax deferred accounts, how would they count pensions? The gains would be very obfuscated in a pension but it is unfair not to count it.
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Old 02-23-2019, 11:24 AM   #19
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In general tax, no tax is paid on tax exempt income, so why count that toward ACA income?
Because that income has been realized, i.e. it is otherwise accessible and not cordoned off in a tax-deferred account. That's the criteria. Changing criteria of that sort would represent a major overhaul of the system.
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Old 02-23-2019, 11:25 AM   #20
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Am I missing something? I'm pretty sure that TIRA/T401K withdrawals *are* part of the MAGI which determines the amount of subsidy, if any. Roth accounts, on the other hand, are not.

I remember when the ACA was preparing to be rolled out and a lot of folks were talking about doing a couple of years of Roth conversions so they could have more excluded income. That was because most retirement income *is* included, save for that coming from a Roth.
I haven't seen any doc on ROTH being excluded but I am hoping it is.

Attached UC Berkeley is a pretty nice doc on what is in MAGI for ACA. Via: http://laborcenter.berkeley.edu/pdf/..._summary13.pdf

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File Type: pdf Modified Adjusted Gross Income MAGI_summary13.pdf (40.8 KB, 20 views)
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