MAGI calculation for ACA subsidy

[Alvin Tostig]

I'm putting this out there to see if my interpretation of the MAGI calculation is correct. I now live in a state (North Carolina) which is one of the remaining 12 states that has not expanded the Medicaid subsidy for ACA. Therefore, as I understand it I must reach a certain minimum income level in 2021 to receive and keep a subsidy.

(I'm currently still getting health insurance through my employer as a part-time employee but that will end 12/31/20 and I can go to COBRA or ACA for 2021. I will be 65 at the end of April 2021, so I will shift to Medicare, but my wife, who is 4 years younger will either remain on COBRA if we choose it or continue on ACA).

When I plugged my estimated income for 2021, I get no subsidy for the ACA unless I get a MAGI of at least $18,000 or greater for the year. So if 2021 looked liked this....

a) estimated part time salary for wife and I ($10,000)
b) estimated capital gains and interest on investments ($5000)
c) withdrawals from IRA's or 401k's ($3000 +)
Total MAGI = $18,000 +

Are my assumptions on b) and c) correct as a component of an ACA subsidy?
If so, that would be great, as I can adjust c) up or down during 2021 depending on what the real numbers are for a and b.

If this is the case, the ACA plan for us would be much cheaper than COBRA.

 

[jim584672]

You need at least 100% FPL or you fall into the gap.

Column 1 is household size, Col 2 is 100% amount.

1 $12,760
2 $17,240
3 $21,720

 

[PaunchyPirate]

Short answer, YES, to all 3 categories of your income listed above. Although, it looks like Roth IRA withdrawals do not count. (I didn't know that.)

Check out this page from healthcare.gov which helps you know what to count as income. The table about 1/4 way down the page is pretty concise and easy to follow:

https://www.healthcare.gov/income-and-household-information/income/

 

[Alvin Tostig]

Jim - thx. Right, more specifically I'm looking at $17,240 not $18,000 as you note.
However, my question was do b) capital gains and c) IRA or 401K withdrawals count towards the $17,240+ subsidy eligibility?

 

[jim584672]

Another source:

Modified Adjusted Gross Income under the Affordable Care Act
https://laborcenter.berkeley.edu/pdf/2019/magi.pdf

 

[Alvin Tostig]

Paunchy - thanks for your input and clarifying what I believed was correct. Good to have a second set of eyes.

 

[RunningBum]

Yes, those pretty clearly count as MAGI income. Don't forget that any HSA or tax-deferred contribution to a 401K or tIRA will reduce that income.

Safest way to make sure you know what's in MAGI is to fill out your taxes and look at form 8962, line 3. For many people that's the same number as 1040 line 8b (AGI), but there are some differences. Google "MAGI vs AGI" to see if any apply to you.

Roth conversions count too. If you don't need the money for living expenses, you might rather convert than withdraw from your IRA/401Ks.

 

[stevemac]

You might also consider having your wife be the primary person on the ACA account, since you'll be leaving in April for Medicare. I can't find the thread right now, but I recall reading somewhere on this site about problems if the primary ACA holder switches to Medicare during the year. Just $0.02.

 

[ivinsfan]

My 2 cents is don't try and thread the needle to hit the exact minimum number...you still get a generous subsidy by getting anywhere in that 18- low 20's area. You can sign up or a HSA compliant plan to help lower your income after you have figure your taxes and see how much wiggle room you have. Your HSA can't be added to after you turn 65 so use the one person limit.

Also be aware that your insurance costs will go up rather then down after you turn 65. You ACA policy will drop in cost very little if at all.

 

[mckittri2000]

Jim - thx. Right, more specifically I'm looking at $17,240 not $18,000 as you note.
However, my question was do b) capital gains and c) IRA or 401K withdrawals count towards the $17,240+ subsidy eligibility?

Yes, they do. Anything that goes against your AGI is fair game according to the ACA. You also correct that Roth distributions do not count against your AGI.

 

[fh2000]

You might also consider having your wife be the primary person on the ACA account, since you'll be leaving in April for Medicare. I can't find the thread right now, but I recall reading somewhere on this site about problems if the primary ACA holder switches to Medicare during the year. Just $0.02.

I am in California so I am not sure if my case is only pertinent to Californians.

I have been the primary account holder for our ACA plan during the past 2 years. I am going into Medicare in January 2021 so I called Covered California. In different calls, each agent told me that I keep the plan as primary/subscriber, though only keep DW on the plan.

So, as it stands now, the plan is still under my name as subscriber, though it is indicated that "fh2000 was enrolled in Medicare on 10/15/2020.", only DW is covered by our ACA plan.

 

[orchid55]

We have just changed my husband from ACA to Medicare. I was the primary on the policy and it was still a pain to drop him - very complicated. My recommendation is to have two separate ACA policies during the changeover year. It is much easier to do the change to Medicare and you don't run the risk of losing coverage for the person who still needs the ACA coverage.