2017 year end tax planning

[scrabbler1]

Good to see other people have done this! My sensitivity analysis shows that for me, an increase of $100 in MAGI results in a $17 loss in ACA subsidy - a 17% marginal 'tax' rate.

Just to clarify, this increase in MAGI refers to income from any source and does not include any change in income taxes, only a decrease in the ACA subsidy. If the income source is LTCG or QD, even though I am in the 0% tax bracket, the ACA subsidy will drop. And, if I happen to itemize my deductions and had some deductible medical expenses, I will see a slight increase in my federal income taxes because my itemized med expenses will drop a little, causing my taxable income to rise a little. So, being in the 0% bracket for QD/LTCG doesn't mean it is actually "zero" for additional dollars of income from those types. (And that doesn't count state income taxes.)

 

[Pilot2013]

All of this consternation and gamesmanship is why a simple "postcode" version of taxes needs to be implemented. Much easier, very little planning!

 

[RunningBum]

The ACA subsidy is based on a few things. But from the sensitivity analysis I have done for my own subsidy, a increase of $100 in my MAGI will result in a decrease in my ACA subsidy of just under $10. This is based on the %-of-FPL which is just under 10% and that determines one's annual HC.

That's what I see, and unless I'm missing something, it's very simple to see. Look at the form 8962 instructions for line 7. The "applicable figure" for 300-400% is 0.0966. This is what you multiple your MAGI by to get your subsidy amount, so an extra $100 is $9.66...just under 10% as you say.

For less than 300% that number gets smaller, so it's even less. I'm not sure how people are getting 15% or 17%. I'm either missing something or they are. Perhaps they are including the normal tax on that extra $100 along with the subsidy loss?

 

[Gumby]

Thanks to all for an informative discussion.