Reducing MAGI for those on the cusps

[jim584672]

I have some ETFs that have a history of having year end distributions. Unfortunately I can only guess the amount. My personal cusp is $1,342 per month, which is max income for Medicaid. Dividends and interest have been crafted to go just under the max limit. The problem is special year end distributions will put me over the limit and I will loose my coverage.
Just a note, the ACA tax credits are yearly based, while Medicaid is monthly based.

So what are creative ways to reduce MAGI income for a month? I am thinking of buying some out of the money options and hope they expire worthless. Another option is to break a CD and use the penalty for early withdrawal to reduce income. Any other ideas?

 

[Texas Proud]

What happens if you go over

I would not go crazy to try and get losses for income you might receive in one month that would put you over the limit...

If you lose your coverage, then you can buy a one month policy and be back in the next month... that is probably cheaper...

 

[Htown Harry]

How do you report your monthly income? Perhaps there are some hidden clues on the form / web page.

I'll also note that most ETF / MF companies publish a list of their funds and their anticipated year-end distribution by November, so you don't have to be completely surprised by the amount.

There may be other ideas in this thread:
http://www.early-retirement.org/forums/f38/minimizing-magi-for-ppaca-68035.html

 

[jim584672]

From what I have read they verify income once a year, but you are responsible for informing them of income changes. I don't know what happens if they are not informed of a change since I am not on it yet. Legally you would loose coverage for the month if it went over the limit.

 

[daylatedollarshort]

I don't know Medicaid rules, but could you start a small business, maybe just something simple like reselling garage sales finds on eBay or some crafts on etsy, and then deduct business expenses, like the cost of goods to sell, craft supplies, a home office, PC, travel to estate sales or auction in other cities, etc.? Maybe start a travel blog and deduct your business travel expenses?

Here are some examples of what you can deduct, including cost of goods sold -

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Deducting-Business-Expenses

 

[pb4uski]

I think you're stuck unless you have some unrealized losses in your taxable accounts that you can sell.

 

[jetpack]

If those ETFs are a recurring problem. Is there a way for you to sell some of them off before year end, and put that money in a more tax managed fund?

 

[TimSF]

According to a UC Berkeley report, the following is a list of "deductions" for ACA MAGI. I am going to make sure I have taken full advantage of these if I am on the cusp (e.g., fully founded a tIRA):

"Student loan interest deduction; IRA deduction (traditional IRA's); moving expenses; penalty on early withdrawal of savings; Health savings account deduction; Alimony paid; Domestic production activities deduction; Certain business expenses of reservists; and Certain business expenses of fee-based performing artists and government officials."

 

[GTFan]

Yeah I'm not following how IRA contributions in the higher months won't count to take care of the problem, since that's part of MAGI. But Medicaid qualification rules vary from state to state - I know that here in GA they have asset-based tests so there's no way to get it if you fall under the 100% FPL ACA floor. Not that I would want it here anyway, Medicaid royally sucks. Much better to stay below 150%-200% FPL and get a very cheap Silver plan with cost-sharing, because it's much more widely accepted by medical providers.

 

[jim584672]

Asset (resource) tests were done away with the Medicaid expansion. Since GA didn't expand the old rules still apply, which means it is almost impossible to get it, barring being destitute.

I am not sure about IRA contributions lowering MAGI. I will have no earned income, only investment income, so IRA contributions are not an option since they require earned income.