What is the best way to defer taxes to future years?

[ShokWaveRider]

We have about $60k next year of dividends from Taxable investments that we need to defer to future years. The reason is to keep MAGI low for DW's ACA.

Any ideas would be appreciated.

 

[pb4uski]

Would redeploying the taxable account blow out your MAGI for 2018? or is that not a concern?

Only idea I have is redeploy in non-dividend equities. Not many options.

http://laborcenter.berkeley.edu/pdf/2013/MAGI_summary13.pdf

 

[ShokWaveRider]

2018 is not a concern, 2019 and 2020 are the years we need to defer. Hopefully keeping returns to at least 3 - 4%

 

[ivinsfan]

Most likely with you being on Medicare you have reached the point of diminishing returns on ACA ..I'd advise just trying to stay under the subsidy cliff, signing up for a bronze plan. Making a deductible HSA contribution and moving on from there.

 

[Huston55]

Most likely with you being on Medicare you have reached the point of diminishing returns on ACA ..I'd advise just trying to stay under the subsidy cliff, signing up for a bronze plan. Making a deductible HSA contribution and moving on from there.

OP-If I used the calculator correctly, your DW’s annual subsidy would be ~$8-12k. Wouldn’t the tax hit from ‘redeploying’ the assets be bigger than that?

 

[ShokWaveRider]

OP-If I used the calculator correctly, your DW’s annual subsidy would be ~$8-12k. Wouldn’t the tax hit from ‘redeploying’ the assets be bigger than that?

Maybe I did not explain completely. We need to defer 60k, that is not our only source of taxable funds. In order to take advantage of the Subsidies we need to defer $60k.

 

[ivinsfan]

Well I guess the good news is that you are on Medicare and will only pay full price on one person. I can't really think of an out for you...

 

[pb4uski]

Maybe I did not explain completely. We need to defer 60k, that is not our only source of taxable funds. In order to take advantage of the Subsidies we need to defer $60k.

Sorry to say it, but I think you are screwed.

 

[Huston55]

OP-If I used the calculator correctly, your DW’s annual subsidy would be ~$8-12k. Wouldn’t the tax hit from ‘redeploying’ the assets be bigger than that?

Maybe I did not explain completely. We need to defer 60k, that is not our only source of taxable funds. In order to take advantage of the Subsidies we need to defer $60k.

Maybe I’m not understanding or, I’m looking at it the wrong way.

- $60k dividends, assuming 2% yield (S&P 500 avg) means total value of $3.0M.

- $12k max ACA subsidy is a wash if you pay taxes on $80k of LT gain ($12k/15%).

- $80k/$3.0M = 2.7% gain; I’d guess in today’s environment, your gain is much, much larger

Of course, I don’t know the details of your Investments but, it seems this would be in the ball park.

Am I looking at this incorrectly?

 

[ShokWaveRider]

Maybe I’m not understanding or, I’m looking at it the wrong way.

- $60k dividends, assuming 2% yield (S&P 500 avg) means total value of $3.0M.

- $12k max ACA subsidy is a wash if you pay taxes on $80k of LT gain ($12k/15%).

- $80k/$3.0M = 2.7% gain; I’d guess in today’s environment, your gain is much, much larger

Of course, I don’t know the details of your Investments but, it seems this would be in the ball park.

Am I looking at this incorrectly?

Not if one is trying to get the Maximum subsidy..... As opposed to a partial.

 

[ivinsfan]

Not if one is trying to get the Maximum subsidy..... As opposed to a partial.

So you want any subsidy or a maximum subsidy your answers are kind of confusing..

 

[ShokWaveRider]

So you want any subsidy or a maximum subsidy your answers are kind of confusing..

I am trying to see how I can get the Maximum subsidy. That is limiting MAGI to around 25 - 30k. I am Still working it out. A Multi Year Annuity may be the way to go.

 

[pb4uski]

A fixed deferred annuity might work, but the returns are low... likely in the 2-3% range so you might be losing overall depending on what assets it is replacing unless you can then replace fixed income with equities in your tax-deferred accounts to balance things out.

 

[bingybear]

OP- If I understand you don't want care about 2018 and you want to defer 60k of dividends for 2 years. I think one answer is below.

Would redeploying the taxable account blow out your MAGI for 2018? or is that not a concern?

Only idea I have is redeploy in non-dividend equities. Not many options.

http://laborcenter.berkeley.edu/pdf/2013/MAGI_summary13.pdf

Redeploying the assets does not technically defer the income, but hopefully change the type of growth and defer the taxes until sold. Instead of dividends, buy growth investment that have little distributions until sold.

Another thing you might consider is selling the dividend producing assets and putting them in either a short term fixed annuity or a variable annuity (low cost). I believe this would take them out of the tax stream for the years that you are concerned about.

I don't know of a magic defer tax mechanism.

 

[ivinsfan]

This subsidy is for one person, not a couple, Your going to rearrange your investments and pay the fees for annuity to avoid paying for health care? And for only two years subsidy? Dont put the cart before the horse