What is the Sweet Spot for Taxable Income?

[GTFan]

Yep, gotta love all the folks who cherry-pick the ER use of ACA subsidies as 'just wrong', then ignore all the other massive subsidies and tax loopholes that the wealthy have been taking advantage of for decades.

It's all wrong when you can't/won't benefit, right? Or are they all wrong? And if they're all wrong, what is right when it comes to taxes?

 

[RetireAge50]

For us, married couple no kids, we plan taxable income to the top of the 10% bracket. Above that the taxes/subsidies is 30% (or higher) so we will defer.

Will use cash/Roth/Home sale proceeds for extra money.

 

[daylatedollarshort]

One reason it can be very advantageous to sell your house and rent. You can live off the tax free proceeds from your house (especially a lot if you have paid it off). This enables you to pretty much have any income level you desire with any tax rate you want for 6 to 10 years.

We have kind of a lock in effect because of high transaction costs to sell and Prop 13 in our location, so that doesn't work for us, but we did take out a home equity line of credit to increase our nontaxable funds pool until DH turns 65. We actually spend more than 400% of federal poverty level annually so it has been a math game for us to keep our MAGI at or below 400% until DH turns 65 and is on Medicare. In a way it has been good beyond just the subsidies because we've learned to live well on less than we otherwise would have had the ACA not come along, and many of those habits we decided to keep even in our post ACA retirement budget.

 

[HadEnuff]

Maybe I should file this under pet peeve.

I find gaming the ACA for subsidies when your sitting on more wealth than 90 % of Americans equal to transferring assets to children to qualify for medicaid. Both are legal , just not the intended spirit of the laws.

But more power to you, its legit , just not my style.

out of curiosity, how is your healthcare insurance funded?

 

[Blue Collar Guy]

out of curiosity, how is your healthcare insurance funded?

My union, my employer and my money. But I get postcards every month or so to attend a seminar on how to take advantage of medicaid , seeing the overwhelming responses on this thread I should attend and game that system too.

 

[Fermion]

My union, my employer and my money. But I get postcards every month or so to attend a seminar on how to take advantage of medicaid , seeing the overwhelming responses on this thread I should attend and game that system too.

From your sig and posts you have made, I think you have a public police officer pension which covers 133% of your expenses. It sounds like you already get some subsidized union healthcare too.

I would imagine it would be quite difficult to reduce your MAGI down to under $23,000 a year (married couple) to qualify for Medicaid. Maybe if you donated your pension to charity you could do it? Would that really be a good idea?

 

[Blue Collar Guy]

From your sig and posts you have made, I think you have a public police officer pension which covers 133% of your expenses. It sounds like you already get some subsidized union healthcare too.

I would imagine it would be quite difficult to reduce your MAGI down to under $23,000 a year (married couple) to qualify for Medicaid. Maybe if you donated your pension to charity you could do it? Would that really be a good idea?

One of the options for medicaid would be to have a divorce, this is as per the post card, IDK the details. but Im sure some do it. There was a small asterisk next to the divorce so Im sure it has to be done correctly.

My son many years ago, got some info on collecting food stamps when he was in college, seems that also was all the rage, That also was not allowed in my house. My house , my rules.

 

[Texas Proud]

One of the options for medicaid would be to have a divorce, this is as per the post card, IDK the details. but Im sure some do it. There was a small asterisk next to the divorce so Im sure it has to be done correctly.

My son many years ago, got some info on collecting food stamps when he was in college, seems that also was all the rage, That also was not allowed in my house. My house , my rules.

I would think that some of this 'gaming' is actually fraud.... managing your income for ACA credits is not fraud... lying to get food stamps or on medicaid is... not saying all schemes are fraud, but some that I have seen are...

 

[Blue Collar Guy]

I would think that some of this 'gaming' is actually fraud.... managing your income for ACA credits is not fraud... lying to get food stamps or on medicaid is... not saying all schemes are fraud, but some that I have seen are...

Im not talking about fraud. Im talking about how to get food stamps in 5 easy steps for students.

If you look at my original post, I said both strategies are legal, I dont care for them. It has now turned into people coming up with their own justification for why they collect them. I said I dont think its cool.

I had some one tell me I was taking food out of a starving child's mouth by getting a .37 cent senor citizen discount. It was her opinion. I didnt agree with it. It was legal, but in her opinion immoral, and thats what I feel about this subject.

P.S. I enjoy posting when time allows me to, As long as I dont have to repeat the same issues Ill answer all replies. But I think its mostly been already said.

 

[HadEnuff]

My union, my employer and my money. But I get postcards every month or so to attend a seminar on how to take advantage of medicaid , seeing the overwhelming responses on this thread I should attend and game that system too.

From your sig and posts you have made, I think you have a public police officer pension which covers 133% of your expenses. It sounds like you already get some subsidized union healthcare too.

I would imagine it would be quite difficult to reduce your MAGI down to under $23,000 a year (married couple) to qualify for Medicaid. Maybe if you donated your pension to charity you could do it? Would that really be a good idea?

So, if I understand this correctly, you are a retired police officer, and your health insurance is covered, at least in part, by your union and the city that formerly employed you.

 

[MichaelB]

Im not talking about fraud. Im talking about how to get food stamps in 5 easy steps for students.

If you look at my original post, I said both strategies are legal, I dont care for them. It has now turned into people coming up with their own justification for why they collect them. I said I dont think its cool.

I had some one tell me I was taking food out of a starving child's mouth by getting a .37 cent senor citizen discount. It was her opinion. I didnt agree with it. It was legal, but in her opinion immoral, and thats what I feel about this subject.

P.S. I enjoy posting when time allows me to, As long as I dont have to repeat the same issues Ill answer all replies. But I think its mostly been already said.

You might consider doing this in your own thread, as this one was a different topic.

 

[gayl]

I find managing income for ACA subsidies much different than transferring assets to children to qualify for medicaid long-term care coverage.... OTOH, transferring assets to children to qualify for medicaid long-term care coverage is IMO fradulent and requires a lot more planning.

is there still a 5 yr waiting period (or time when assets can be seized) when applying for medicaid LTC? At any rate, I want to age in place or a nice private room. No way do I want to be one of four

As to this topic, I would rather just pay for my own insurance and pick the insurance / facility that I want to be seen at rather then have some government agency tell me where I can go

 

[youbet]

is there still a 5 yr waiting period (or time when assets can be seized) when applying for medicaid LTC? At any rate, I want to age in place or a nice private room. No way do I want to be one of four

As to this topic, I would rather just pay for my own insurance and pick the insurance / facility that I want to be seen at rather then have some government agency tell me where I can go

Medicaid for LTC varies a bit from state to state, in interpretation and enforcement if not in actual rules. It pays to check locally.

In Illinois, I speak from personal ongoing experience when I say that it is sometimes possible for a child or other responsible party to find quality LTC for an elderly parent paid for by Medicaid. We're doing it for MIL. It helps a lot if the elderly parent starts their LTC as private pay for at least a couple of years. But it is becoming more and more difficult as the financial condition of the state deteriorates and NH's struggle to collect the meager Medicaid payments.

Some of the high percentage Medicaid NH's we toured were, IMHO, places to be avoided if you have any choice and are still alive enough to care or know what's happening to you.

I'm glad we should be able to private pay for any needed care.

 

[youbet]

Yep, gotta love all the folks who cherry-pick the ER use of ACA subsidies as 'just wrong', then ignore all the other massive subsidies and tax loopholes that the wealthy have been taking advantage of for decades.

I don't have a dog in the fight (other than as a tax payer helping to foot the bill), but as long as it's transparent and within the laws and rules, I understand managing MAGI to qualify for ACA subsidies and don't fault folks for doing so. BUT, I'd like to see some reasonable asset testing put into place similar to LTC Medicaid. Then folks could play within those new rules and the controversy of high net worth folks getting ACA dole dollars could end.

 

[MrLoco]

I find managing income for ACA subsidies much different than transferring assets to children to qualify for medicaid long-term care coverage.

In most cases of FIRE, these people are increasing their income over what it would be if they did nothing. In some cases they don't want to be on Medicaid and are effectively volunteering to accelerate income and as a result they get subsidies under the law. To me, this is no different from managing income to avoid/defer income taxes.

OTOH, transferring assets to children to qualify for medicaid long-term care coverage is IMO fradulent and requires a lot more planning.

I don't understand why you think transferring assets to qualify for Medicaid is "fraudulent." Granted, I understand you may have a moral/ethical reason to not like it, but "fraudulent" connotes "illegal" and this is not the case.
I think when we interject our own morals/values when it comes to investing/saving/planning strategies for retirement; we defeat the purpose of investing to begin with.

Remember, if an elderly parent does transfer assets to children they give up control forever. And what if the child does not help out the parent in latter years? Also, an elderly parent would need to take such action 5 years before applying for MEdicaid benefits. How many actually take the time to do this?

One scenario where this might make sense would be if the parents had pensions and SS which covered 100+% of their monthly expenses and assets of say $5 million. They could transfer all their assets to the children, using their lifetime gift tax exclusion, and still pay their own expenses month after month. If they satisfy the 5 year look back rule and need eventual nursing home care ...MEdicaid picks up the tab ( or the balance after applying their pension and SS). If they never need MEdicaid, the children already have their inheritance which they would have gotten anyway.

YEs, I know ....then taxpayers have to foot the bill. I am one of those taxpayers and I am fine with it. I already "game" the system for an ACA subsidy which covers half of our monthly premium. If the gov't didn't want me to do that...then change the law. Simple as that. I remember when the ACA was first rolled out; my CPA was telling all his clients to try to manipulate their income ( if this made sense in their specific case) to qualify for a subsidy. That is a good CPA doing his job and nothing fraudulent about it. Same with transferring assets early to be able to pick up MEdicaid. I hear elder care attorneys constantly "touting" strategies to do this on the radio. I guess the Gov't could always change the rules to employ a 10 year look back period.

We don't make the rules. We just play the game.

 

[pb4uski]

To be clear, you are wrong.... I did not say or even infer either was illegal. Fraud is defined by Black's law dictionary as "A knowing misrepresentation of the truth or concealment of a material fact to induce another to act to his or her detriment." IME, in most cases those who manage their income for ACA subsidies are not concealing what they are doing but most who play the Medicaid game are more stealthy.

Also, there is a matter of degree. According to Kaiser, the average ACA credit is $371/month and ranges from $178/month to $592/month. So a wealthy person playing the subsidy game would get a $2,150 to $7,100 annual benefit.

OTOH, the average nursing home cost per Medicaid is $6,600/month and ranges from $4,800/month to $9,900/month. So a wealthy person who receives taxpayer subsidized nursing home care get an annual benefit of $57,600 to $118,800....broadly 20 times the benefit of those playing the ACA game.

Finally, to play the nursing home game one needs to actually do something.... transfer assets to beneficiaries with 5 years foresight.... they are knowingly taking action to conceal their wealth to induce the government to pay for their nursing home costs.

To play the ACA game most people are actually not doing anything.... despite their wealth their income absent any actions on their part would result in a subsidy (I know that is true in my case).... they are just either deferring starting their pension or social security or not withdrawing from retirement accounts to avoid increasing their income. In some cases, they might be increasing their income just enough to avoid Medicaid... just replacing one government paid benefit (Medicaid health insurance) with another (ACA subsidies).

IMO there is a huge difference between taking actions to specifically receive costly Medicaid nursing home benefits and not taking action to benefit from ACA subsidies.

And as a retired CPA I think I have a good understanding of it... and the difference.

 

[jim584672]

Those getting ACA Medicaid (ages 55 through 64) are subject to estate recovery and since they have assets on death the government will be able to recover most what was spent on them. The government is only giving a glorified loan. ACA subsidies are not subject to recovery. So the poor (too poor to get out of Medicaid) can never pass on wealth but those with high enough income can pass it on.

 

[pb4uski]

....So the poor (too poor to get out of Medicaid) can never pass on wealth....

If they are poor there is no wealth to pass on.... so what is your point?

 

[HadEnuff]

To be clear, you are wrong.... I did not say or even infer either was illegal. Fraud is defined by Black's law dictionary as "A knowing misrepresentation of the truth or concealment of a material fact to induce another to act to his or her detriment." IME, in most cases those who manage their income for ACA subsidies are not concealing what they are doing but most who play the Medicaid game are more stealthy.

Also, there is a matter of degree. According to Kaiser, the average ACA credit is $371/month and ranges from $178/month to $592/month. So a wealthy person playing the subsidy game would get a $2,150 to $7,100 annual benefit.

OTOH, the average nursing home cost per Medicaid is $6,600/month and ranges from $4,800/month to $9,900/month. So a wealthy person who receives taxpayer subsidized nursing home care get an annual benefit of $57,600 to $118,800....broadly 20 times the benefit of those playing the ACA game.

Finally, to play the nursing home game one needs to actually do something.... transfer assets to beneficiaries with 5 years foresight.... they are knowingly taking action to conceal their wealth to induce the government to pay for their nursing home costs.

To play the ACA game most people are actually not doing anything.... despite their wealth their income absent any actions on their part would result in a subsidy (I know that is true in my case).... they are just either deferring starting their pension or social security or not withdrawing from retirement accounts to avoid increasing their income. In some cases, they might be increasing their income just enough to avoid Medicaid... just replacing one government paid benefit (Medicaid health insurance) with another (ACA subsidies).

IMO there is a huge difference between taking actions to specifically receive costly Medicaid nursing home benefits and not taking action to benefit from ACA subsidies.

And as a retired CPA I think I have a good understanding of it... and the difference.

I agree with most of what you say, except the part where you say they are "concealing" their wealth. I'd say they are "transferring" their wealth. And i would assume, legally, either by taking advantage of the law that allows them to do so without taxation, or exceeding that amount and paying taxes. The difference is huge, because they no longer control those assets.

Concealing would be more along the lines of hiding cash in safe deposit boxes and not claiming it when divulging their asset base. THAT would be illegal.

 

[pb4uski]

Fair point... perhaps conceal isn't the right term... but IME those who play the Medicaid nursing home game are a lot more devious about what they are doing than those who defer income to qualify for ACA subsidies. The cases that I can think of those who transfer assets to qualify for Medicaid nursing home coverage are just plain cheap and perhaps that colors my view of the practice.

 

[Z3Dreamer]

There is a generational component to the moral/ethical discussion. I remember my father arguing with his sister/my aunt. Her career gave her big problems with her legs. My father's point was that she could qualify for disability income. Her angry tirade was that she did not want disability. In her opinion, anyone who applied was a bad person. She and my uncle had no assets and lived in an apartment their whole lives. But qualifying for such a program would label her as a "loafer".

My father, OTOH, felt that he qualified for that half price coffee at {insert favorite fast food location} so he was going to take it, even though he had a vast annual income of $25,000 from his pension. This was in the 90's.

 

[pb4uski]

I agree but your father and aunt were the same generation. Also, I'm not sure if it is generational but may be something else.... DS is occasionally laid off and refuses to apply for unemployment benefits... he doesn't want to be "on the dole"... and a part of it is that he hates dealing with bureaucrats and would loathe to jump through their hoops for $400/week... OTOH, DSIL was recently laid off and promptly applied (smart).

 

[Texas Proud]

Im not talking about fraud. Im talking about how to get food stamps in 5 easy steps for students.

Wow...can you show me where that info is... I would like to see how they do that...

 

[alaska55]

Maybe I should file this under pet peeve.

I find gaming the ACA for subsidies when your sitting on more wealth than 90 % of Americans equal to transferring assets to children to qualify for medicaid. Both are legal , just not the intended spirit of the laws.

But more power to you, its legit , just not my style.

Just like this it's legal ,just not the intended spirit of the laws. Work a lot of overtime in the last years just to jack up you pension.

Port Authority should replace expensive pension plan to help stay afloat | Opinion | NJ.com

 

[Walt34]

[mod hat on]

Can we get back to the original topic? The thread is drifting toward political issues and when that happens a well-know porcine will make his appearance. Thanks.

[mod hat off]