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They should count income from tax deferred accounts for ACA subsidy
02-23-2019, 09:26 AM
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#1
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Join Date: Nov 2017
Posts: 137
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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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02-23-2019, 09:30 AM
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#2
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Join Date: Jun 2007
Posts: 13,227
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Quote:
Originally Posted by Cpadave
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.
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How do you figure that?
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02-23-2019, 09:32 AM
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#3
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Join Date: Nov 2017
Posts: 137
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Quote:
Originally Posted by RunningBum
How do you figure that?
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Its the additional tax on our investment income this year. Will not be as high or zero going forward.
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02-23-2019, 09:34 AM
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#4
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Join Date: Aug 2010
Posts: 1,089
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Quote:
Originally Posted by Cpadave
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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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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02-23-2019, 09:36 AM
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#5
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Join Date: Nov 2017
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Quote:
Originally Posted by fh2000
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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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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02-23-2019, 09:42 AM
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#6
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Join Date: Jun 2016
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Quote:
Originally Posted by Cpadave
... If the purpose is affordability ...
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ACA has nothing to do with affordability. Incomes up to 100K (family of 4 example) get still get subsidies.
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02-23-2019, 09:47 AM
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#7
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Join Date: Nov 2017
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Quote:
Originally Posted by Spock
ACA has nothing to do with affordability. Incomes up to 100K (family of 4 example) get still get subsidies.
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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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02-23-2019, 09:52 AM
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#8
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2007
Posts: 13,227
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Quote:
Originally Posted by Cpadave
Its the additional tax on our investment income this year. Will not be as high or zero going forward.
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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.
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02-23-2019, 09:56 AM
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#9
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Recycles dryer sheets
Join Date: Nov 2017
Posts: 137
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Quote:
Originally Posted by RunningBum
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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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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02-23-2019, 09:56 AM
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#10
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Administrator
Join Date: Jan 2008
Location: Chicagoland
Posts: 40,715
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This is a policy discussion, so the thread was moved to the more appropriate forum.
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02-23-2019, 09:58 AM
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#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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"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
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02-23-2019, 10:04 AM
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#12
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Full time employment: Posting here.
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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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02-23-2019, 10:05 AM
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#13
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Quote:
Originally Posted by ziggy29
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.
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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.
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02-23-2019, 10:11 AM
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#14
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Join Date: Nov 2011
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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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02-23-2019, 10:15 AM
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#15
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Quote:
Originally Posted by GrayHare
In general tax is not levied until the income is realized. Deferred income has not yet been realized.
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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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02-23-2019, 10:18 AM
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#16
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Quote:
Originally Posted by Cpadave
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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Because that is the law that was passed.
Affordable.
Quote:
Originally Posted by Cpadave
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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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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02-23-2019, 10:20 AM
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#17
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Quote:
Originally Posted by Cpadave
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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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.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
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02-23-2019, 10:23 AM
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#18
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Recycles dryer sheets
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Posts: 276
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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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02-23-2019, 10:24 AM
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#19
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Join Date: Nov 2011
Posts: 3,902
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Quote:
Originally Posted by Cpadave
In general tax, no tax is paid on tax exempt income, so why count that toward ACA income?
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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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02-23-2019, 10:25 AM
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#20
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Full time employment: Posting here.
Join Date: May 2015
Posts: 528
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Quote:
Originally Posted by ziggy29
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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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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