ACA tax credits

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samsdad
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ACA tax credits

Post by samsdad »

Our COBRA coverage is ending effective Nov. 1 because UnitedHealthcare is pulling out of Colorado. Wife works part time so can’t get on employer’s insurance. We’re going to enroll in ACA insurance in a few weeks to become effective Nov. 1 so don’t have a gap. We can get our family of four 2018 MAGI under the 98k-ish limit to get some premium subsidies ($550 or so/month), but it’ll take a lot of work. Still, we figure it’d save us $7k or so in premiums and are going to try via 401k, tIRAs, etc.

But we more than likely be unable to get our MAGI down anywhere close in 2019.

So, my question is, I'm assuming we’re signing up for 2019 ACA here in a few weeks; is 2019 ACA going to look at our 2018 MAGI or our 2019 for subsidies purposes?
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Re: ACA tax credits

Post by marcopolo »

2019 MAGI for 2019 premium support
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munemaker
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Re: ACA tax credits

Post by munemaker »

The short answer is that when you sign up for ObamaCare, the application is going to require you to list each of the income and deduction (e.g. TIRA) categories that contribute to 2019 MAGI. If you have more or less income than stated on the application, you make up the difference when you file your 2019 taxes (except you do not pay back the CSR subsidies).

No way they are going to use 2018 MAGI because you would not have filed your 2018 taxes at the time you are applying for 2019 ObamaCare.

We have been on ObamaCare for the past two years, and that is how it has worked in the past. Our concern is we have read some articles (can't find them at the minute) stating the current administration is going to require additional income verification in 2019 for those in subsidy range. Seems like some people that fall below the minimum income requirement are lying about their income and saying they will make more than they do to qualify for ObamaCare when they should rightfully be on Medicaid; very low income people are not required to repay the subsidy, so basically it is fraud. So if we are presented with a requirement to prove our MAGI, how would we do that? I guess we will cross that bridge when we come to it.

EDIT: Found those articles:
- https://www.shvs.org/the-2019-affordabl ... or-states/ - See the "Income Inconsistencies" section
- https://www.healthexec.com/topics/polic ... -rule-2019 - See section 4. "Income Verification for Premium Subsidies"
Last edited by munemaker on Thu Sep 20, 2018 8:05 pm, edited 2 times in total.
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Phineas J. Whoopee
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Re: ACA tax credits

Post by Phineas J. Whoopee »

Each year on one's tax return one reconciles the premium tax credit with what income turned out to be, so yes as stated above the total 2019 credit will be based on 2019 modified adjusted gross income in the end.
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LadyGeek
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Re: ACA tax credits

Post by LadyGeek »

munemaker wrote: Thu Sep 20, 2018 2:23 pm The short answer is that when you sign up for ObamaCare, the application is going to require you to list each of the income and deduction (e.g. TIRA) categories that contribute to 2019 MAGI. If you have more or less income than stated on the application, you make up the difference when you file your 2019 taxes (except you do not pay back the CSR subsidies).

No way they are going to use 2018 MAGI because you would not have filed your 2018 taxes at the time you are applying for 2019 ObamaCare.

We have been on ObamaCare for the past two years, and that is how it has worked in the past. Our concern is we have read some articles (can't find them at the minute) stating the current administration is going to require additional income verification in 2019 for those in subsidy range. Seems like some people that fall below the minimum income requirement are lying about their income and saying they will make more than they do to qualify for ObamaCare when they should rightfully be on Medicaid; very low income people are not required to repay the subsidy, so basically it is fraud. So if we are presented with a requirement to prove our MAGI, how would we do that? I guess we will cross that bridge when we come to it.
To be clear, munemaker is referring to a CMS final rule: Patient Protection and Affordable Care Act; HHS Notice of Benefit and Payment Parameters for 2019, as published in the Federal Register, effective on June 18, 2018.
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samsdad
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Re: ACA tax credits

Post by samsdad »

I realize that the question seems obvious, but I’m self employed and won’t know what my MAGI is till the end of the year. Straight W-2 folks I guess would be able to get a fairly good estimate long in advance, but pay raises and (heaven forbid) a year-end bonus could tip them over unexpectedly.

For example, I could envision someone right on the $98k-ish cusp for a family of four being given a $5k bonus and winding up with their $6k-7k subsidy wiped out effectively making 100% of that bonus or raise going straight to Uncle Sam. First-world problem I suppose, it just seems a little funny. Would anyone enjoy getting a surprise(!) additional $6K-7k bill cause the boss thought well of them this year? Better save that bonus or raise.
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munemaker
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Re: ACA tax credits

Post by munemaker »

samsdad wrote: Thu Sep 20, 2018 9:39 pm I realize that the question seems obvious, but I’m self employed and won’t know what my MAGI is till the end of the year. Straight W-2 folks I guess would be able to get a fairly good estimate long in advance, but pay raises and (heaven forbid) a year-end bonus could tip them over unexpectedly.

For example, I could envision someone right on the $98k-ish cusp for a family of four being given a $5k bonus and winding up with their $6k-7k subsidy wiped out effectively making 100% of that bonus or raise going straight to Uncle Sam. First-world problem I suppose, it just seems a little funny. Would anyone enjoy getting a surprise(!) additional $6K-7k bill cause the boss thought well of them this year? Better save that bonus or raise.
A couple ideas: You could contribute the max to a traditional (deductible) IRA for you and your spouse. Depending on your relationship with your employer, you could ask them to defer your bonus to next year. I did that once and the employer agreed to it. This was with a smaller privately owned company, not a large company where they are probably less flexible.
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