ACA and cliff

[SoReady]

Hi,

This question is related ACA and how much MAGI to claim when filing taxes MFJ and one person turns 65.

When the older person turns 65 (then goes on Medicare) and the spouse is 2 years younger (for example), is the restriction to stay below ~$64k/yr still applicable in order to receive subsidies? In other words, for the next 2 years the limit for MAGI, in order to get subsidies, is less than ~$64k/yr?

I bring this up because I was hoping to do more Roth conversions after 65. But then realized that my wife being younger may restrict how much ROTH converting we can do, because much of the ~$64k will be needed for yearly expenses.

Thanks,

Bob D

 

[MRG]

If your question is about one one Medicare and one on ACA that's our situation, albeit not because of age. I just stay under 250% of FPL for two people and get great results.

I'm sorry the 64k bit confuses me a little.

 

[SecondCor521]

To the best of my knowledge:

The subsidy cliff is at 400% of FPL. FPL depends on where you live in the US and your tax family size. FPL also increases with inflation over time. Assuming you live in the continental US and your tax family size is 2 and you're looking at 2019, then your FPL would be $16,460. 400% FPL would be $65,840.

The next thing is what to compare that number to. For the ACA, it is a particular flavor of your MAGI. Quoting from https://thefinancebuff.com/federal-poverty-levels-for-obamacare.html:

"You qualify for the premium subsidy only if your modified adjusted gross income (MAGI) is at 400% FPL or below. If your MAGI goes above 400% FPL even by $1, you lose all the subsidy. See Stay Off the Obamacare ACA Premium Subsidy Cliff.

Modified Adjusted Gross Income for Obamacare is basically your gross income minus above-the-line deductions, plus tax-exempt muni bond interest, plus untaxed Social Security benefits."

I think that last sentence above is roughly equivalent to line 37 of your 1040 plus the tax-exempt muni bond interest and untaxed SS benefits.

When are you planning on going on SS in this scenario? If at age 65 or 66, those benefits could affect your ACA MAGI.

In my understanding, if you want an ACA policy for your wife when you're 66 and she's 64, the fact that you're on Medicare makes no difference.

 

[pj.mask]

Would married filing separately solve this?

 

[SoReady]

Thanks, yes th 400% FPL becomes $65,840 next year. I try to manage my income to get close to that but not over in order to utilize subsidies. Based on what I'm gathering from the replies is regardless that i may be over 65, I need to manage the income levels to accommodate ACA until she becomes 65.[/QUOTE]

 

[SoReady]

married filing separately may help. I need to investigate this.

 

[zinger1457]

MAGI used for ACA purposes is based on household income even if only one spouse is applying for coverage so you would need to stay under $65K.

 

[SoReady]

Bummer.

 

[Texas Proud]

Thanks, yes th 400% FPL becomes $65,840 next year. I try to manage my income to get close to that but not over in order to utilize subsidies. Based on what I'm gathering from the replies is regardless that i may be over 65, I need to manage the income levels to accommodate ACA until she becomes 65.

I plan to see how much subsidy I will get compared to the cost of insurance...


IOW, when there is only one person to insure on ACA it might not be the best tax wise to keep under the cliff and do as much converting as you can... for me right now I have 4 people on the plan and I keep income low...


I still have 4 years to 65 and who knows what kind of subsidy will be available then...

 

[Texas Proud]

A question I have related to this...


So, one person goes on medicare and the other is ACA.... but the income level is based on the two people, so would not the subsidy go down a good amount since you are only paying for one ACA policy but your fair share is based on the income for two?

 

[Dtail]

I plan to see how much subsidy I will get compared to the cost of insurance...


IOW, when there is only one person to insure on ACA it might not be the best tax wise to keep under the cliff and do as much converting as you can... for me right now I have 4 people on the plan and I keep income low...


I still have 4 years to 65 and who knows what kind of subsidy will be available then...

My DGF is already on Medicare due to SSDI. I manage my MAGI under 150% of FPL.
I haven't really calculated the Roth conversion comparison. I was planning on taking SS at 70 and thus reducing my TIRA from 65-70 instead.
Ah so many decisions....

 

[Carol1862]

At the beginnng of 2018 both my husband and I filed for ACA and subsidy. In the spring when he turned 65 and went on MC my subsidy decreased. (my insurance costs more now).

 

[SoReady]

Another bummer!

 

[ivinsfan]

Yes we have had a few people caught in this issue and more then a few have made the frowny face when they realize going on Medicare means they will now pay more in insurance per couple. It is what it is, no point being upset about it.

 

[ivinsfan]

At the beginnng of 2018 both my husband and I filed for ACA and subsidy. In the spring when he turned 65 and went on MC my subsidy decreased. (my insurance costs more now).

Well technically your insurance costs the same but the household subsidy went down because you have only one person on an ACA plan....

 

[SoReady]

I googled the Married Filed Separately and came up with this...

Taxpayers whose filing status is married filing separately are explicitly ineligible to receive subsidies in the exchange, regardless of their income. ... For everyone else, the rules are clear that married couples must file a joint tax return in order to qualify for subsidies in the exchanges.Jan 3, 2018

 

[gauss]

Well technically your insurance costs the same but the household subsidy went down because you have only one person on an ACA plan....

I think this is only true if you neglect to account for the expense of the Medicare part B/D premiums.

-gauss

 

[ShokWaveRider]

My Personal Healthcare costs under ACA are $0 pm. premium due to my MAGI Management for the Silver plan with $10 PCP Copay and $35 Specialist Copay, with $2250 Max OOP. No Deductible.


With Medicare (Coming up Later this year) it goes up to about $350 pm. with a Part "F" Supplement. Not sure what deductibles or Copays or Max OOPs are when on Medicare, or even if there are any. That is a lot more than ACA. But it is what it is, at least it remains relatively constant and a lot less volatile.

 

[MichaelB]

So, one person goes on medicare and the other is ACA.... but the income level is based on the two people, so would not the subsidy go down a good amount since you are only paying for one ACA policy but your fair share is based on the income for two?

ACA subsidies are determined by household but applied to each individual, so when one spouse goes from an individual policy to Medicare, the net cost of an ACA policy for the other spouse should remain the same.

 

[MBSC]

So, one person goes on medicare and the other is ACA.... but the income level is based on the two people, so would not the subsidy go down a good amount since you are only paying for one ACA policy but your fair share is based on the income for two?

Correct. A tax family at 300% FPL is still contributing roughly 9.5% MAGI towards their under 65 premiums if they chose the SLCSP and not a lower cost plan. The subsidy decreases because the additional cost of an under 65 self-only plan is lower than the additional cost of an under 65 family plan. However, they are now paying Medicare Part B premiums and optional supplement/Part D premiums so total insurance premium spending increases.

ETA:

ACA subsidies are determined by household but applied to each individual, so when one spouse goes from an individual policy to Medicare, the net cost of an ACA policy for the other spouse should remain the same.

Subsidies are applied to the plan. Since the calculations are based on the SLCSP, the net cost may be different when switching from a non-SLCSP family plan to a non-SLCSP self-only plan.

 

[ivinsfan]

I think this is only true if you neglect to account for the expense of the Medicare part B/D premiums.

-gauss

I'm not talking couple the poster said her ACA went up obviously it will cost the couple more money.

 

[Mr._Graybeard]

ACA subsidies are determined by household but applied to each individual, so when one spouse goes from an individual policy to Medicare, the net cost of an ACA policy for the other spouse should remain the same.

It did not stay the same in my case -- DW went on Medicare this month, and my ACA subsidy dropped by well over $200/mo when I went to a single plan (Bronze w/HSA). I suspect I may see some reimbursement from the IRS next year, but for now I'm paying more.

 

[ivinsfan]

It did not stay the same in my case -- DW went on Medicare this month, and my ACA subsidy dropped by well over $200/mo when I went to a single plan (Bronze w/HSA). I suspect I may see some reimbursement from the IRS next year, but for now I'm paying more.

You probably will continue to pay more, I wouldn't count on getting it back. The household gets the subsidy not the person, you cannot spilt a subsidy. On the MN exchange everyone in the family unit must use the same plan/subsidy.

The subsidy is determined by

Household Income
Number of people in the household

and finally number of people in the household actually buying an exchange plan. The computer spits out a number and there you are. If you are wondering about your situation and possible changes go to a website and enter some numbers...the MN Sure site is very easy to use.

 

[MichaelB]

It did not stay the same in my case -- DW went on Medicare this month, and my ACA subsidy dropped by well over $200/mo when I went to a single plan (Bronze w/HSA). I suspect I may see some reimbursement from the IRS next year, but for now I'm paying more.

I don't doubt that is the case. These calculations and projections are neither easy nor straightforward, and I suspect the Yogi Berra quote applies to how it should work vs how it does in real life.

"In theory there is no difference between theory and practice. In practice there is

 

[Mr._Graybeard]

In past years Healthcare.gov has consistently underestimated our subsidy eligibility, and we ended up getting refunds from the IRS as a result. I don't know why this year would be any different.