Fell off the income cliff

[SenorDave]

Good morning everyone.
DW and I have been enrolled in a health marketplace plan since we FIRED a couple of years ago.
We were eligible for the subsidy of around $1600 per month and all was working nicely.
Unfortunately, not all of our assets are in tax sheltered accounts. One of our stocks was targeted for takeover and when that happened late in 2022, the new company paid out all outstanding shares at a very nice price. I had planned on keeping our income from pension and dividends right around $60,000 per year, but the capital gains pushed us to $80,000.
While I was pleased with the great return on investment, we didn't have enough losses on other taxable investments to get us down below the income cutoff level.
I know, first world problems.
We're resigned to having to repay our 2022 premiums along with any incurred penalties.
I have a couple of questions.
1. We are still receiving the subsidy, but will the fact that we have to repay 2022 have any impact upon our insurance and 2023 subsidy going forward?
2. We are still 6+ years away from medicare eligibility. I'm wondering if we would be better off to try to unwind our non tax sheltered stocks and invest the proceeds into mutual funds and such things where this wouldn't happen again?
We have no immediate plans nor need for the funds.
Thanks

 

[Sunset]

For us, mutual funds (except Vanguard ones) have been a source of surprise declarations of dividends/capital gains.

So we moved to ETF's as they are structured differently, and when other people sell, it does not cause us to get a capital gain.

I aim for ETF's and even Vanguard FUNDS, or just actual stocks, but not too many.

 

[Spock]

So... there are less than savory loop holes in ACA subsidies.
If your income exceeds your projection the 1095 process will reclaim some of the subsidy. The loop hole is the clawback is capped at something like $650...
I haven't fished off that pier intentionally and I may be misinterpreting what is happening there so don't take my word for it. I'm not advocating doing it intentionally. But the game is played by the rules as they are written.

 

[cathy63]

$80K exceeds 400% of the federal poverty level for a family of two in 2022, so there is no cap on what you have to pay back. However, the maximum that you will have to pay for insurance premiums is 8.5% of your income. With your income, that works out to $6800/yr or $567/mo. Take whatever you paid each month and and subtract that from $567 then multiply by 12. That's the amount you'll have to pay back. There is no penalty.

Whatever happened in 2022 is irrelevant for your 2023 subsidy, though of course it could all happen again next year.

 

[jim584672]

The 4X FPL cliff was removed through 2025 with the "Inflation Reduction Act".

 

[OldShooter]

As a taxpayer why, exactly, would you think I should subsidize you when you have adequate money to pay your own way?

 

[Spock]

As a taxpayer why, exactly, would you think I should subsidize you when you have adequate money to pay your own way?

How quaint. (sarcasm).

MMT: Tax payers only contribute about 50 cents of every dollar spent now days, the indignant taxpayer is becoming less relevant.
Fed money printer go "brrrrrr".

 

[Taco]

As a taxpayer why, exactly, would you think I should subsidize you when you have adequate money to pay your own way?

A bit harsh. The OP was eligible for the subsidy, and then unexpectedly was not. They were just asking on how to make amends now that they are no longer eligible - not trying to get out of making amends.

 

[RunningBum]

Have you actually filled out your taxes yet? You may still get a subsidy, albeit less of one that you were planning. And yes, you are entitled to that subsidy since you are following current tax law, no matter what some people say.

If you get questions on your 2023 subsidy, you can explain the extra 2022 income as a one-time event.

Do you own other stocks that you feel are likely to be taken over? The only way to prevent this would be to sell, triggering a capital gain, so that doesn't seem to be a good plan. If you do decide to invest in mutual funds, I suggest index funds such as VTSAX (or ETF equivalent VTI). It shouldn't have CG distributions, and dividends are fairly predictable.

 

[RetMD21]

The 4X FPL cliff was removed through 2025 with the "Inflation Reduction Act".

It seems to be more of a slope than a cliff now

 

[erkevin]

Jim is correct; the cliff is gone. The most you will have to pay for the second-lowest silver plan is 8.5% of your income. No need to panic. This new law is for 2023, 24, and 25

 

[EastWest Gal]

And if you haven’t filed your tax return, amount you may owe in income tax will pay the difference in your premiums.

In 2021, we underpaid our premiums significantly, and made up for most of it with increased quarterly tax payments. We still missed and had to pay a penalty. Our state exchange calculated our premium wrong and tried to charge us 0$. When we did our taxes, we realized a problem and manually adjusted our premium.

Later in 2022, we did a tax loss harvest and realized we were overpaying our premiums, so we adjusted it to zero at the end of the year. We paid about $5000 in HI premiums overall which was just about right. Our state’s exchange miscalculated our premium tax credit again for 2023. They tried to charge us 0$ again year. So I’ve adjusted it to about $500/month. Any further adjustments can be made through quarterly tax payments.

 

[dmpi]

Year after year I tend to sell my losers and let my winners ride, This causes me to carry over a large stock loss which I claim $3000 per year. This also gives me the ability to absorb large capital gains without spiking my income...not that I would mind that happening.

 

[ownyourfuture]

Same thing happened to me in 2018.
Doesn't look like you'll be punished as bad as I was.
Changed my federal return from a refund of around $150, to owing an additional $5400.