2018 Capital Gain Dist will affect my ACA costs

[audreyh1]

Do you have any shares that have losses? If so, you could sell shares at a loss. If you own the ETF version you should be able to sell identified shares. If you own the MF shares, then you may be stuck with average share cost based if that is what you picked the first time shares were sold.

Remember if you sell shares this year to miss the distribution, you still need to deal with taxes on the sale of shares.

If he is currently showing a loss, then he gets a tax and income reduction after selling the shares.

 

[UtahSkier]

If you are optimizing your income to manage ACA subsidies, you need very precise control of income. This control is better achieved with an all ETF (or individual stocks) portfolio in your taxable accounts.

I hold Wellesley Admiral fund, but only in my tax advantaged accounts.

 

[Which Roger]

Also, for those with snide remarks concerning those of us with high level assets attempting to secure an ACA subsidy....why even post since your snide remarks add nothing to the discussion and does not help the OP out in any way.

+1. Or at least start a different thread instead of hijacking this one, which started with a legitimate question that the OP and others could learn something from.

 

[Texas Proud]

I guess should have added a 3Rd option as you describe. One concern I have is, if I wait until after the capital gains are distributed, will I have enough time to actually get the sale transaction complete. Let's say they do the distributions December 21, markets are closed through Christmas. I don't know how long it takes for an actual sale transaction to complete. If the transaction completes after December 31, 2018, ACA subsidy is lost.

Sorry to all the replies that find my learning to optimize ACA subsidies offensive. It's this diligent study of rules and financial interest that has allowed me to ER at 52.

You should know that amount before they make a distribution... they estimate it much earlier... sell more than you need... do not try and cut it so close that some extra distribution would make a difference...


BUT, you can sell before the end of the year and it would happen...

 

[Texas Proud]

I had always been just a little under the MAGI cap to get a small subsidy, until 2017, when a huuuge LTCG distribution from a stock fund tossed me well over the cliff. Selling shares beforehand would not have helped because my cost basis was pretty low. I will be watching closely for the upcoming year-end LTCG distributions to see if I go over the cliff again. If I am close, I may be able to sell some stuff at a loss to rescue me.

I would go the other way if this happened to me... I have a whopping $300 of losses I can take so there is no way for me to fix the problem...


SOOO, I would then sell as much as I can and take cap gains at zero tax rate of the funds that are throwing off these distributions... I have a few that are tax advantaged that throw off very little and a few that throw off some big gains... get rid of the problem ones and buy something that is not...

 

[beowulf]

+1
I would like to see one negative comment about ACA income management from folks using the technique.
I am renting - not asking anyone to give up their mortgage deduction.

Why would anyone using the technique for ACA subsidies complain about it? That would be counter-intuitive. Like Warren Buffet asking for his taxes to be higher. Oh, he has done that. No problem with anyone taking any legal steps to reduce their taxes. ACA is a different matter - it's not a tax. It was hyped as a plan to help people who could not afford health insurance and/or those with pre-existing conditions. The concept of subsidies was to aid those with very low incomes to be able to obtain health insurance through ACA plans. Does the word affordable ring a bell. Yes - Congress messed up the criteria. If you believe the intent was to allow people with substantial investable assets who showed very low MAGI on their tax returns to take advantage of the ACA, then you are probably living in CO smoking some weed.

It's not like tax deductions for medical bills or owning a home or other itemized items (many of which have been eliminated or capped). This is a loophole that allows far wealthier people than intended to take advantage of a plan intended to help folks far more disadvantaged than most people on this forum. If you have $3M in assets and decided to retire at 45, why should you be able to take advantage of a program meant to help people with less than $40K or so in income and few assets. Whether you believe it or not, that was the original intent. We pay nearly $10K a year in Medicare and supplemental insurance premiums for two people. And we have far less in assets that most people here. Is that fair? I may not like it, but I don't complain that it's unfair that I have to pay higher Medicare premiums if we break the $170K lowest tier premium.

It's not that you're doing anything illegal. To me, it's simply immoral to some degree. You may not like what I say, but I have the same right to say it as you do to complain that you may lose your ACA subsidy because you retired early without health insurance, have substantial investments and decided to take advantage of a program meant for the poor or normally uninsurable.

 

[Sunset]

Why would anyone using the technique for ACA subsidies complain about it? That would be counter-intuitive. Like Warren Buffet asking for his taxes to be higher. Oh, he has done that. No problem with anyone taking any legal steps to reduce their taxes. ACA is a different matter - it's not a tax. It was hyped as a plan to help people who could not afford health insurance and/or those with pre-existing conditions. The concept of subsidies was to aid those with very low incomes to be able to obtain health insurance through ACA plans. Does the word affordable ring a bell. Yes - Congress messed up the criteria. If you believe the intent was to allow people with substantial investable assets who showed very low MAGI on their tax returns to take advantage of the ACA, then you are probably living in CO smoking some weed.

It's not like tax deductions for medical bills or owning a home or other itemized items (many of which have been eliminated or capped). This is a loophole that allows far wealthier people than intended to take advantage of a plan intended to help folks far more disadvantaged than most people on this forum. If you have $3M in assets and decided to retire at 45, why should you be able to take advantage of a program meant to help people with less than $40K or so in income and few assets. Whether you believe it or not, that was the original intent. We pay nearly $10K a year in Medicare and supplemental insurance premiums for two people. And we have far less in assets that most people here. Is that fair? I may not like it, but I don't complain that it's unfair that I have to pay higher Medicare premiums if we break the $170K lowest tier premium.

It's not that you're doing anything illegal. To me, it's simply immoral to some degree. You may not like what I say, but I have the same right to say it as you do to complain that you may lose your ACA subsidy because you retired early without health insurance, have substantial investments and decided to take advantage of a program meant for the poor or normally uninsurable.

The OP is following the rules.
Problem with deciding on the morality of actions when following the rules is that immorality applies in (my) opinion to many things.
Like elected officials taking thousands to millions of dollars into their campaign funds (accounts where it is money they control the spending). Smells like bribes to me.
My paying of tax dollars, then some of those tax dollars are used to kill people via bombs which kill innocents as well. Smells like I paid for murder.
Lots of immoral stuff happening based on following the rules.

 

[Teacher Terry]

I totally agree Bewolf. 6 years ago when we retired our income was 40k and our health insurance was 10k and our savings was not huge. so yes while it’s legal to do what some are doing but I agree doing so is not living with integrity. Our income is now 60k and we pay 12k for insurance. However, people manage to justify in their own minds when they will benefit from something ethically questionable.

 

[audreyh1]

It would be perfectly moral and legal for the OP to notice that he has a loss in a fund, and to try to avoid a higher than expected capital gains distribution and try to offset it, so that his income is lower and his taxes are lower.

Somehow because he is near a limit of an ACA subsidy it becomes immoral......living without integrity.

Sheesh!

People plan and manage their income to reduce taxes or avoid other penalties such as IRMAA limits or reduce future RMDs all the time.

 

[flintnational]

Listening to the complaints, i realize FIRE (and normal retirement for that matter) is immoral and unethical. We should all keep working and maximize tax revenue. If you ain't a workin, you are being subsidized! Get back to work you unethical, immoral good for nothing layabouts!

My posting response options -

Option 1 was snark. I decided against it. (I use it too much)
Option 2 was reason. I decided it wouldn't make a difference.
Option 3 was humor. I went that route. (maybe)

 

[beowulf]

The OP is following the rules.
Problem with deciding on the morality of actions when following the rules is that immorality applies in (my) opinion to many things.
Like elected officials taking thousands to millions of dollars into their campaign funds (accounts where it is money they control the spending). Smells like bribes to me.
My paying of tax dollars, then some of those tax dollars are used to kill people via bombs which kill innocents as well. Smells like I paid for murder.
Lots of immoral stuff happening based on following the rules.

I fully agree that our country and our elected officials do that are immoral and downright illegal. But we vote for our elected officials who make the laws in our country. And then we have no real control over what they do until the next election. Nor can we refuse to pay taxes for things our government does that we disagree with.

None of that has any relevance to someone with a large bank balance taking advantage of a program fully intended for those in need. It's sort of like living in a $1M house, driving a Lexus and then going to the local food bank to pick up bread and other staples. I'm sure it happens and I, personally, consider it deplorable. Is it legal? Yes. Is it moral, no.

 

[audreyh1]

If someone has a large bank balance in taxable accounts, they already paid a boatload of taxes on it.

 

[Rianne]

Morality, like beauty, is in the eye of the beholder. Is it moral to mock the disabled? Some think so. Is it moral to pollute rivers/waterways? Not sure, those who benefit from it don't seem to mind. I can get on my soapbox and preach morality all day long. The question is, who will listen? Who will care?

 

[beowulf]

It would be perfectly moral and legal for the OP to notice that he has a loss in a fund, and to try to avoid a higher than expected capital gains distribution and try to offset it, so that his income is lower and his taxes are lower.
Somehow because he is near a limit of an ACA subsidy it becomes immoral......living without integrity. Sheesh!
People plan and manage their income to reduce taxes or avoid other penalties such as IRMAA limits or reduce future RMDs all the time.

You are misinterpreting what I am saying. I have no problem with people making moves with investments to avoid higher taxes, IRMAA penalties, etc. In those cases, you are simply not taking income and not paying the tax on that income. There is no other benefit you get from that.

Once again, if you have significant (by significant, I mean in the $2 or 3M plus range) assets and are trying to not breach the ACA, cliff so you can get healthcare subsidies, IMHO, you are playing poor to gain a benefit not intended for you. How would you feel if you went into a supermarket, saw someone pay for their purchase with food stamps (outdated term, but I don't know the new term) and then get into a new Mercedes in the parking lot. Would you judge? Would you call that immoral use of a benefit not meant for that person? Maybe they're just a low paid driver - but your initial assumption would most likely be, that it's some sort of fraud and certainly immoral.

I don't know what assets the people on this forum possess other than what they hint at. If they are truly in need, live at the edges of poverty, even if they are RE and made that choice to do so without adequate assets to support themselves, then they are morally entitled to take advantage of ACA subsidies. And yes, I am judging - if you are wealthy (and I've laid out the parameters for that earlier), then you have no moral right to take advantage of a benefit intended for those in need. If you have a pre-existing condition, you can always sign up for ACA without a subsidy so that you will have health insurance.

 

[beowulf]

If someone has a large bank balance in taxable accounts, they already paid a boatload of taxes on it.

What does that have to do with receiving an ACA subsidy? If anything, it's more reason to not take advantage of a benefit meant for others.

 

[Fedup]

@beowulf, you have a point, one of my kids is in the poor category, but when she made $47k exactly, she got no subsidy. She paid for her non-subsidy ACA health plan out of her own salary.

 

[beowulf]

Listening to the complaints, i realize FIRE (and normal retirement for that matter) is immoral and unethical. We should all keep working and maximize tax revenue. If you ain't a workin, you are being subsidized! Get back to work you unethical, immoral good for nothing layabouts!

Why would you assume that? Even if you are just being snarky, we all have the unalienable right to live in a hovel in the middle of nowhere, cut our own firewood, grow or kill our own food, and stay off the grid. I've thought about it many times .

Retirement or RE is something many of us plan or planned for and made sure we had the assets we needed to achieve it. The real issue is that probably 70% of our current population has either not planned or cannot save for retirement. That ain't a joke and it will really hurt the next generation.

But snarkiness is a good thing .

 

[beowulf]

@beowulf, you have a point, one of my kids is in the poor category, but when she made $47k exactly, she got no subsidy. She paid for her non-subsidy ACA health plan out of her own salary.

And I agree that is wrong. It should not be a cliff - the cutoff should be a gradual slope. My daughter is in the same position with a slightly higher salary.

They are not the ones I am railing about - it's the people who have the money to pay due to their assets, but take advantage of a system not meant for them.

 

[Which Roger]

The only moral aspect of the tax code is that we are all obligated to pay every penny that we legally owe, and nothing more. The rest is just a math problem.


Also, taking advantage of a particular deduction generally involves foregoing some other way of saving on taxes. The trade-off between more Roth conversions and receiving an ACA subsidy is an oft-cited example in this forum.

 

[Rianne]

Oh, I see. I always thought tax breaks were intended for the middle class and the poor. Somehow that didn't work out so well. Thought mortgage deductions were meant for those who could not afford the full cost of a home. Thought scholarships/grants were for those who could not afford an education. Thought everyone should pay their tax liabilities, even m/billionaires figure out ways around that one. I believe affordable healthcare is for everyone, whether your rich or poor. In America, a rich person can go bankrupt in a very short time when health is at stake. I have seen it. A wealthy family go bankrupt when their child had an incurable disease. Affordability is in the eye of the beholder.

 

[flintnational]

I'm confused? Is it just the tax break side where we should apply the morality test, or can we also not pay taxes we think are immoral? I am trying to find the logical consistency in the "tax morally" position. I suspect the answer from the proponents of "tax morality" is that it is one sided. Don't take deductions we say are immoral but pay all the taxes required by the law whether deemed moral or immoral.

 

[youbet]

Listening to the complaints, i realize FIRE (and normal retirement for that matter) is immoral and unethical. We should all keep working and maximize tax revenue. If you ain't a workin, you are being subsidized! Get back to work you unethical, immoral good for nothing layabouts!

My posting response options -

Option 1 was snark. I decided against it. (I use it too much)
Option 2 was reason. I decided it wouldn't make a difference.
Option 3 was humor. I went that route. (maybe)

Your post was supposed to be Option 3?

 

[youbet]

The only moral aspect of the tax code is that we are all obligated to pay every penny that we legally owe, and nothing more. The rest is just a math problem.

Some of us would say there is more to it than that. For example, a tax code which highly favored the wealthy and screwed the poor (and these have existed from time to time historically around the world) would not meet with my favor. I'd be one of the revolutionaries marching on the castle. It might be legal and we all might be paying what we legally owe, but there is more than just a math problem there.

 

[youbet]

If someone has a large bank balance in taxable accounts, they already paid a boatload of taxes on it.

Only if the money got there via taxable income. Perhaps it's there due to an inheritance or due to being the beneficiary of a life insurance policy.......

 

[Dtail]

Why would anyone using the technique for ACA subsidies complain about it? That would be counter-intuitive. Like Warren Buffet asking for his taxes to be higher. Oh, he has done that. No problem with anyone taking any legal steps to reduce their taxes. ACA is a different matter - it's not a tax. It was hyped as a plan to help people who could not afford health insurance and/or those with pre-existing conditions. The concept of subsidies was to aid those with very low incomes to be able to obtain health insurance through ACA plans. Does the word affordable ring a bell. Yes - Congress messed up the criteria. If you believe the intent was to allow people with substantial investable assets who showed very low MAGI on their tax returns to take advantage of the ACA, then you are probably living in CO smoking some weed.

It's not like tax deductions for medical bills or owning a home or other itemized items (many of which have been eliminated or capped). This is a loophole that allows far wealthier people than intended to take advantage of a plan intended to help folks far more disadvantaged than most people on this forum. If you have $3M in assets and decided to retire at 45, why should you be able to take advantage of a program meant to help people with less than $40K or so in income and few assets. Whether you believe it or not, that was the original intent. We pay nearly $10K a year in Medicare and supplemental insurance premiums for two people. And we have far less in assets that most people here. Is that fair? I may not like it, but I don't complain that it's unfair that I have to pay higher Medicare premiums if we break the $170K lowest tier premium.

It's not that you're doing anything illegal. To me, it's simply immoral to some degree. You may not like what I say, but I have the same right to say it as you do to complain that you may lose your ACA subsidy because you retired early without health insurance, have substantial investments and decided to take advantage of a program meant for the poor or normally uninsurable.

Okay up to date with all the posts.
As some others have posted, we are just using the tax code as it is written. I do agree with you on the original intention and your right to state it as such.
As previously mentioned, some use Roth conversions instead of ACA management of income.
My point about complaining about the usage, is IMHO that many posters against the use of ACA income management is because they can't do it themselves, so are against those that do.
If you had 25k of TIRA withdrawals and supplemented it with 50k of cash for example, would you not take the subsidy, or would you state to yourself that it is immoral and you are going to stand on principle and pay 7x more?