Estimating income for ACA and HSA contributions for a partial yr plan

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James1
Posts: 29
Joined: Tue Jun 23, 2015 5:59 pm

Estimating income for ACA and HSA contributions for a partial yr plan

Postby James1 » Fri Apr 21, 2017 1:29 am

I will be moving back to the states in a month and I need to estimate my income for the year for an ACA health plan. If the plan starts in June, will I be able to contribute the full amount?

To estimate my income I planned to do the following:
Income from overseas + US income -18k (401k contribution) - 11k (tira contributions for 2) - 6.67k (HSA contribution)

Is there anything else I should include in the estimate?
Thanks!

Spirit Rider
Posts: 5492
Joined: Fri Mar 02, 2007 2:39 pm

Re: Estimating income for ACA and HSA contributions for a partial yr plan

Postby Spirit Rider » Fri Apr 21, 2017 3:09 am

Will the overseas income qualify for the foreign earned income exclusion?

If you have a Qualified High Deductable Health Plan covering more than yourself on 12/1 and you are an HSA eligible individual, then you can use the "last month rule". This would allow you to contribute the full family plan limit even though your eligiblity was for less than the whole year. There would be a"testing period" for all of 2018, but that would not impact your 2017 MAGI.

James1
Posts: 29
Joined: Tue Jun 23, 2015 5:59 pm

Re: Estimating income for ACA and HSA contributions for a partial yr plan

Postby James1 » Fri Apr 21, 2017 5:58 pm

Yes, the foreign income will qualify for the FEIE. Does that matter for HSA contributions or ACA income estimates?

So as long as I have an HSA eligible plan in December, I can contribute the full amount. What would the testing period entail for 2018?

Thanks for your help!

Spirit Rider
Posts: 5492
Joined: Fri Mar 02, 2007 2:39 pm

Re: Estimating income for ACA and HSA contributions for a partial yr plan

Postby Spirit Rider » Fri Apr 21, 2017 6:28 pm

I was incorrect in mentioning the foreign earned income exclusion. Foreign Earned income is included in the ACA MAGI which determines ACA subsidies. It is applied later reducing the actual tax paid.

Yes, if you are an HSA eligible individual on 12/1 you can make the full year's contribution. If you take advantage of that opportunity and make the full contribution, you must remain eligible throughout the entire following year.

If you don't there is a 10% penalty on the amount of contributions greater than what would have been allowed without the last month rule. However, if you make the contributions by payroll deduction and your Social Security earnings are < the SS max wage base (2017 = $127,200), the contribution will not be subject to the 7.65% FICA tax. You do not have to pay this back, so the net effective penalty is only 2.35%


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