UtahSkier
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We all know about the Obamacare surtax that raises the top capital gains rate for high income families. This surtax is not being discussed.
Obamacare insurance premiums are based upon income as a percentage of the poverty level income up to 400%. It is my understanding that Poverty level income includes dividends and interest income but not capital gains.
I thinking about a certain situation I may be facing in 2014 and beyond. I am trying to determine my effective marginal tax rate when generating dividends and interest income. Here are the specifics;
Married couple... 52 years old.
AGI of 75,000.
To simplify things, let us say the tax paid for this income is $10000.
Also, to simplify things we don't know, let us say the dividend tax rate in 2014 is 20%.
Now, using the Kaiser healthcare calculator (or the Berkley one), I calculate my insurance premium to be $7125 with a $10,728 subsidy.
So, my total tax is $17125.
Now, Situation B has the same original AGI, but now we are going to include dividend income of $20,000. For starters, the dividend tax rate of 20% will add $4,000 to the tax bill. So, the situation B will have a tax paid of $14,000.
Now, we have to calculate the insurance premium for the AGI of $95,000.
Using the healthcare calculators, the insurance premium is now $17,853 (0 subsidy). With an AGI of $95,000, my total tax now is $14,000 +$ 17,853 = 31,853.
The delta between the 2 situations is 21,853. So a portfolio that generates 20K of dividends, will incur $21,853 in additional taxes. This makes my marginal tax rate in excess of 100%.
Run the numbers again for a family aged 60 and 64 and the situation is dramatically worse.
Is there anything I am misunderstanding?
Obamacare insurance premiums are based upon income as a percentage of the poverty level income up to 400%. It is my understanding that Poverty level income includes dividends and interest income but not capital gains.
I thinking about a certain situation I may be facing in 2014 and beyond. I am trying to determine my effective marginal tax rate when generating dividends and interest income. Here are the specifics;
Married couple... 52 years old.
AGI of 75,000.
To simplify things, let us say the tax paid for this income is $10000.
Also, to simplify things we don't know, let us say the dividend tax rate in 2014 is 20%.
Now, using the Kaiser healthcare calculator (or the Berkley one), I calculate my insurance premium to be $7125 with a $10,728 subsidy.
So, my total tax is $17125.
Now, Situation B has the same original AGI, but now we are going to include dividend income of $20,000. For starters, the dividend tax rate of 20% will add $4,000 to the tax bill. So, the situation B will have a tax paid of $14,000.
Now, we have to calculate the insurance premium for the AGI of $95,000.
Using the healthcare calculators, the insurance premium is now $17,853 (0 subsidy). With an AGI of $95,000, my total tax now is $14,000 +$ 17,853 = 31,853.
The delta between the 2 situations is 21,853. So a portfolio that generates 20K of dividends, will incur $21,853 in additional taxes. This makes my marginal tax rate in excess of 100%.
Run the numbers again for a family aged 60 and 64 and the situation is dramatically worse.
Is there anything I am misunderstanding?