American Rescue Act

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hammockman
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Joined: Thu Feb 09, 2017 9:31 am

American Rescue Act

Post by hammockman »

Regards to the American Rescue act as it relates to the ACA and the ACA income cliff, I have a query: Is my assumption correct that I could do ROTH conversions this year and next, and this would not affect my tax credits we currently enjoy. Keeping in mind we're both 61 and living on after tax cash, only taking enough distributions from pre-tax accts to get to the sweet spot for tax credits. I certainly don't want to ruin a good thing by getting greedy with Roth conversions......
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Wiggums
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Re: American Rescue Act

Post by Wiggums »

The Affordable Care Act's (ACA) "subsidy cliff" normally ends at a household income of 400% of the poverty level. For 2021 and 2022, the American Rescue Plan (ARP) has eliminated the subsidy cliff. Instead of ending subsidies when a household's income exceeds 400% of the poverty level, the ARP ensures that subsidies gradually decline as income grows. People who earn more than 400% of the poverty level are subsidy-eligible in 2021 and 2022 if the benchmark plan would otherwise cost more than 8.5% of their household income.
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curmudgeon
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Re: American Rescue Act

Post by curmudgeon »

Like all things ACA, the answer is: "it depends". It depends on your county, and the plans offered in your county. On which specific plan you have. On what income level you are at currently, and what you might go to...

Take a look at the premium estimator for your state and specific plan, and enter some various income levels into it. Once you get to a point where the after-subsidy premium starts going up, the reduced ACA subsidy as income rises further will effectively act like a 8.5% surtax tax bracket on top of whatever income tax rates you are paying.
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FiveK
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Re: American Rescue Act

Post by FiveK »

Topic Author
hammockman
Posts: 56
Joined: Thu Feb 09, 2017 9:31 am

Re: American Rescue Act

Post by hammockman »

Thanks all, very helpful
VanGar+Goyle
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Re: American Rescue Act

Post by VanGar+Goyle »

hammockman wrote: Wed Aug 04, 2021 5:17 pm Regards to the American Rescue act as it relates to the ACA and the ACA income cliff, I have a query: Is my assumption correct that I could do ROTH conversions this year and next, and this would not affect my tax credits we currently enjoy. Keeping in mind we're both 61 and living on after tax cash, only taking enough distributions from pre-tax accts to get to the sweet spot for tax credits. I certainly don't want to ruin a good thing by getting greedy with Roth conversions......
In general, there is no ACA "tax cliff" due to the American Rescue Plan Act this year and in 2022, and
Roth conversions can affect your taxable income.
After Modified Adjusted Gross Income ( MAGI ) exceed 4 times the Federal Poverty Level (FPL),
the ACA Partial Tax Credit is affected by 8.5% of MAGI, so it is then a flat slope.

I am curious where you think the sweet spot is.
Is it the roughly 2%, 3%, 4%, 6%, or 8.5% slope.
Well, you pay a little bit, we're a little bit tough. | You pay very much, very much tough. | You pay a too much, we're too much a tough. | How much you pay? ... Well, then we're plenty tough. - Marx
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